Chapter 621 Acquisition of TMobile

No. bile

T-Mobile is the fourth largest telecom operator in the United States at this time, following AT\u0026T, Verizon and Sprint.

O2 Telecom hopes to enter the North American market by acquiring T-Mobile USA. After all, the size of this market is still huge, and T-Mobile only ranks fourth in the American market, which also shows that this company still has relatively high room for growth.

At the same time, Deutsche Telekom also intends to sell T-Mobile, which is the basis for the two parties to start negotiations on this.

The reason is, first of all, that T-Mobile's situation in the North American market is not very good.

Deutsche Telekom, known as the "German Tank", entered the U.S. market through the acquisition of VoiceStream Wireless and Powertel in 2001. At that time, the U.S. telecom market was in a stage of rapid development and was full of opportunities for Deutsche Telekom.

However, such a market is also full of competition.

In 1996, the FCC, the telecommunications regulatory agency of the United States, created a loose competitive environment through deregulation. Competitors, large and small, continued to spring up, and the competition was very fierce.

In addition, with the rise of emerging forces such as Apple and Android in recent years, operators in the United States have borne the brunt of the impact. Foreign operators like Deutsche Telekom who are trying to make gold in the American market are in relatively bleak operating conditions.

You know, because AT\u0026T invested in Apple in advance, it obtained the exclusive sales rights of iPhone mobile phones in North America.

Although the sales volume of Honor Mate mobile phones is not inferior to that of iPhone mobile phones, T-Mobile does not have the exclusive sales rights. Honor Electronics' strategy is to obtain as many partners as possible.

Therefore, among the telecom operators in the United States, T-Mobile has no advantage in competing with Sprint and Verizon. On the contrary, AT\u0026T has seized some market share because it has the exclusive sales rights of iPhone.

Statistics show that T-Mobile accounts for a quarter of Deutsche Telekom's sales revenue, but it is difficult to catch up with competitors in 3G, and user losses are accelerating.

In the past five years, T-Mobile America has experienced profit declines in four years, and approximately 56,000 users abandoned T-Mobile in 2007 and switched to other operators.

At the same time, AT\u0026T, Sprint and Verizon all saw increases in subscriber numbers.

Under such circumstances, selling T-Mobile has become a last resort for Deutsche Telekom.

Moreover, due to the impact of the subprime mortgage crisis, it has become more difficult to obtain bank financing. For the telecommunications industry, this will worsen its operating conditions.

The reason why Deutsche Telekom is willing to sell T-Mobile is that it hopes to increase its capital reserves and temporarily abandon the highly competitive North American market to focus on the European market and emerging markets such as Asia and Africa.

At present, the only difference between O2 Telecom and Deutsche Telekom lies in the acquisition price.

When T-Mobile USA's market value was at its highest, it was close to US$40 billion. However, with the decline in its performance and the impact of the subprime mortgage crisis, its stock price has fallen by more than 35% from last year's highest point, and its market value is less than US$26 billion.

"I believe that selling T-Mobile's US business will help your company focus on more growth markets. The mobile Internet is still in its infancy, and it is very important to make the right choice."

After hearing what Barron said, even though this was indeed their idea, Deutsche Telekom CEO Lenny Obermann still asked:

"Then why did you make the choice to enter the North American market? Your Highness the Duke."

"Because now in terms of market size, O2 Telecom is not involved in much. Entering the North American market through acquisition is also a good way. Although the competition there is fierce, I still want to give it a try..."

Barron smiled and said:

"Of course, T-Mobile is one of our options, but it's not the only one."

Deutsche Telekom currently operates in about 50 countries around the world, mostly in Western and Central European countries, while its subsidiary T-Mobile's business involves North America and Northern Europe. This time O2 Telecom is planning to acquire T-Mobile USA , its North American branch.

Compared with the scale of Deutsche Telekom, O2 Telecom is much smaller and currently only involves the markets of Western Europe and Eastern Europe. As Barron said, in Lenny Obermann's view, it is somewhat young and energetic. the meaning of.

This is not difficult to think of. After all, Barron is still less than thirty years old, but he has achieved amazing success and owns a huge industry. Under such circumstances, it is normal for him to be confident and even arrogant. .

But Barron also made it clear that T-Mobile is not O2 Telecom's only choice.

This is also true. In addition to T-Mobile, Sprint or the American branch of Virgin Telecom can also enter the acquisition options of O2 Telecom.

Taking Sprint as an example, their current scale and market share are slightly higher than T-Mobile, ranking the third largest telecom operator in the United States.

In Barron's previous life, after Sun Zhengyi succeeded in acquiring Vodafone Japan, he chose to acquire Sprint and enter the American market after a while, trying to replicate his success in the Japanese telecommunications industry with Sprint.

However, the acquisition of Sprint did not satisfy Sun Zhengyi...

But for now, the acquisition of Sprint can still be one of O2 Telecom's alternatives.

Putting these aside, at least for now, T-Mobile is still O2 Telecom's first target.

What impressed Deutsche Telekom about O2 Telekom was that they were willing to acquire T-Mobile in full cash at a certain premium. After the news of O2 Telekom's acquisition of T-Mobile came out, other companies were interested in T-Mobile, including AT\u0026T and Sprint in the United States, which had tried to contact Deutsche Telekom.

But in the same way, Deutsche Telekom still lists O2 Telekom as the first buyer of their subsidiary T-Mobile.

It is because although O2 Telekom's bid is not the highest, they are willing to acquire it in full cash.

The acquisition plans of AT\u0026T and Sprint are mainly stock acquisitions, and these two companies are the leading telecom operators in the United States. Their acquisition of T-Mobile will inevitably lead to investigations by relevant regulatory agencies, which will inevitably prolong the entire acquisition process.

O2 Telecom has not entered the American market before, and its acquisition of T-Mobile USA will not involve monopoly, so it is easier for relevant regulatory authorities to approve it.

The reason why the two parties are still in negotiations is that they have not reached an agreement on the acquisition price.

O2 Telecom will form a consortium with Caesar Fund to acquire T-Mobile this time, and there will be support from Standard Chartered-Merrill Lynch behind it. Such M\u0026A projects are very popular with investment banks. Through consulting and financing services, investment banks that undertake these projects can often obtain good returns.

For Barron, it is natural that "fat water does not flow to outsiders", especially after the acquisition of Merrill Lynch, Standard Chartered-Merrill Lynch now has very rich experience in this business.

O2 Telecom's offer to T-Mobile is $27.5 billion. This price is not much higher than T-Mobile's current market value, but considering the current market situation and the fact that it is an all-cash acquisition, it is quite competitive.

However, Deutsche Telekom is not satisfied with this offer. They hope to sell T-Mobile for $30 billion, so that they can get enough liquidity and promote the share repurchase plan while their stock price is low to boost investor confidence.

So the two sides continued to negotiate between the two bids and the asking price.