Recently, French telecom operator Iliad submitted an offer to purchase 56.6 percent of T-Mobile to the tune of $15 billion.
The offer is bold given the difference in size between the two operators with Iliad having a market capitalization of $16 billion, compared to T-Mobile’s $25 billion. However, according to James Allison, IHS senior analyst for operators, there is concern regarding Iliad’s ability to make the required investments in branding and networking to succeed in the U.S.
Iliad's free brand and disruptive pricing model has been very successful in France. The company initially caused a stir in the fixed telecom market by bundling broadband, voice over IP (VoIP) and Internet protocol television (IPTV). It then entered the mobile services world in early 2012. Shortly after this event, Iliad caused French mobile average revenue per user (ASRPU) to fall by 25 percent.
IHS believes that if the bid is successful, Iliad will need to take a different tactical approach in the U.S. because they will be entering the market mobile first, without any ability to cross-sell from an existing fixed telecom operation. Furthermore, the regulatory environment in the U.S. is less suited to challengers than Iliad’s home country.
However, we expect that Iliad will still cause disruption in the U.S. mobile market if the T-Mobile deal closes - putting significant downward pressure on mobile ARPU levels across the mobile market. This is a big deal because currently the U.S. mobile market has relatively high ARPU levels compared to other countries. By the same token, this opens up a variety of opportunities for Iliad to innovate and impact the mobile U.S. market.
We also believe that Iliad should explore partnerships with fixed operators to strengthen its overall U.S. market position and complement its mobile business.
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