French telecom giant Free bids for T-Mobile US

French upstart telecom operator Iliad, which operates Free, said on Thursday it has bid for a controlling stake in US carrier T-Mobile, offering an alternative to a potential tie-up with rival Sprint.

French telecom giant Free bids for T-Mobile US
France's Iliad, which operates Free, has bid for a contolling stake in US carrier T-Mobile. Photo: Eric Piermont/AFP

French upstart telecom operator Iliad said on Thursday it has bid for a controlling stake in US carrier T-Mobile, offering an alternative to a potential tie-up with rival Sprint.

Iliad said in a statement it proposed $15 billion for 56.6 percent of T-Mobile, which is controlled by Germany's Deutsche Telekom and is the fourth largest US wireless group.

The offer was described as 42 percent above what T-Mobile's price had been before reports of a potential Sprint tie-up began circulating.

Iliad, still majority owned by French Internet pioneer and the firm's founder and former CEO Xavier Niel, carved out a major slice of the French home telecoms market through innovative offers and aggressive pricing. It was awarded a mobile phone licence in 2009.

The French firm said a deal with T-Mobile was a good fit because both firms have been "disruptive" by offering lower prices and new services to challenge major rivals.

"The US mobile market is large and attractive," said the statement by Iliad, which operates the growing Free service in France, providing a "triple-play" phone, Internet and cable television deal.

"T-Mobile US has successfully established a disruptive position, which in many ways, is similar to the one Iliad has built in France."

The statement said that a tie-up with the French group "should not raise any antitrust issue in light of the competition rules given that Iliad is not present in the United States."

A deal for Sprint and T-Mobile to merge has been brewing for months, with one report saying terms valuing T-Mobile at more than $30 billion were being hammered out.

Sprint, the number three US carrier which is controlled by Japan's SoftBank, has made it known that it wants T-Mobile to challenge the top two operators, Verizon and T-Mobile.

T-Mobile had not previously indicated any interest in being bought, although some reports indicate that Deutsche Telekom, which owns a controlling stake, would like to cash out.

Iliad said it would finance the deal "via a combination of debt and equity" and that it "has the support of leading international banks for the acquisition debt."

T-Mobile US shares were up more than 6.5 percent to close at $32.94 on the news.

T-Mobile issued a statement said it had received an offer from Iliad, indicating it would not comment further.

Credit Suisse analyst Joseph Mastrogiovanni said in a note to clients that the Iliad bid "seems a bit of a stretch" and that Sprint would likely pay a higher price but that "it could put pressure on Sprint to move sooner rather later."

"Ultimately, we believe T-Mobile would find a combination with Sprint more attractive," the analyst said.


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‘Forget Silicon Valley, it’s better in France’

As work began on the "world's largest" tech incubator in Paris, French billionaire and telecom mogul Xavier Niel says despite the moribund French economy and the reputation of its bureaucracy, it's actually easier to start a business in France than Silicon Valley.

'Forget Silicon Valley, it's better in France'
Is is easier to start a business in France than Silicon Valley? Photo: Luke Ma/Flickr, AFP

On the occasion of the laying the ceremonial first brick of what he claims will be the world’s largest start-up incubator, Niel has been telling reporters why France is so great.

“It’s much easier to start a company in France than Silicon Valley where everybody copies you,” Niel, 47, told Europe 1 radio on Thursday. “In France there is support for starting a company. The grass is not greener on the other side.”

Niel knows what he's talking about. He founded Free, which is France's second largest internet provider and third biggest mobile phone service.

His €230 million incubator at Gare d’Austerlitz is to open in 2016 and will provide a range of services, advice and access to funding for entrepreneurs who have a great tech business idea, but little else.

The 33,000-square-metre space is to be home to 3,000 workers.

Niel agrees France has its problems, but notes that it has strengths that exist nowhere else.

“Of course the French system isn’t perfect, there’s only one company on the CAC 40 (France’s benchmark stock market) that is less than 30 years old when they make up 50 percent of the market in other countries,” Niel said.

But he also noted France’s reputation for high taxes isn’t deserved.

“It’s true, though it must sound bizarre, but I pay less in capital gains tax in France than my successful friends pay in the United States,” he said. “On top of that the best engineers are from here.”

He added: “When I travel, I always see French people working in high tech businesses. We train them well, they are great, they are famous throughout the world.”

And he's not afraid to go where the money is. The first business he founded was at age 19 sold sex-related chat services on France's now defunct internet precursor Minitel.

As France tries to convince the world that it’s open for business, and not dominated by stagnant Socialism and record unemployment, the incubator is getting a lot of support from the country’s ruling class.

Historically unpopular president François Hollande laid the ceremonial first brick on Wednesday the crowd of some 200 people in attendance included many of his government’s ministers.

Along with the appointment of an ex-banker to fix the economy and public relations visits to the UK and Germany, France has launched a charm offensive aimed at giving it a business-friendly image.

Niel says the truth about France has been obscured by nasty propensity to bash it in the press.

“The idea is that France is a fantastic place to start a company. People don’t realize it because we life in a world marred by ‘bashing’,” he told Europe 1. “But in France we have all the services needed to found a company.”