Tuesday, August 14, 2012

T-Mobile USA Targeted In Private Equity Buyout

T-Mobile USA is being targeted by former telecommunications executive Sol Trujillo, who is trying to generate enough interest among private equity firms to buy all or part of the carrier, according to a Bloomberg article. The report, which cited unnamed sources familiar with the matter, said that so far Trujillo's attempts to develop interest in such an acquisition have been unsuccessful. 

Trujillo, who used to head  U.S. West Communications, Orange and Telstra, has talked with the Blackstone Group and KKR about a bid, though the firms are skeptical of any deal. All of the parties declined to comment, Bloomberg said. AT&T's $39 billion acquisition of T-Mobile fell apart last year amid resistance from regulators. 

Deutsche Telekom remains open to a whole or partial sale of the company, the report said, but noted that a sale to private equity firms has not been discussed by the German company's board.

In May Deutsche Telekom CEO Rene Obermann said it was unlikely DT would try to sell T-Mobile again following the collapse of the AT&T deal. "We continue to look for a long-term solution to improve earnings in our U.S. business," Obermann told shareholders at Deutsche Telekom's annual general meeting. "However, a complete sale like the one to AT&T is considered unlikely."

Interestingly, the DT chief also said at the time that the company was not excluding "any option for the T-Mobile unit in the U.S., also not a merger." Obermann said the company was exploring ways to increase its return on capital or reduce its capital investment in the market, and is looking at other partnerships and other unnamed "non-organic steps."

T-Mobile is embarking on a $4 billion network upgrade to launch LTE next year on its 1700 MHz AWS spectrum and refarm its 1900 MHz PCS spectrum for HSPA+ services. The company received AWS spectrum from AT&T as a result of the collapse of the deal, and is now trying to swap AWS spectrum with Verizon Wireless. Spectrum is seen as T-Mobile's most valuable asset. Meanwhile, the carrier is trying to sell off its 7,000 U.S. towers, most likely to a tower company, with Crown Castle reportedly the lead bidder.

Curiously, the Bloomberg report also said that Trujillo has also sought private equity firms to fund a buyout of Sprint Nextel. However, such a deal is considered highly unlikely; Sprint declined to comment, according to Bloomberg.

"Financing is cheap right now. But even though it's possible, it doesn't mean that such a deal is going to happen," Tom Taulli, a consultant for mergers and acquisitions, told Bloomberg. "We've not seen many $10 billion-plus leveraged buyouts anywhere."

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