Rebirth of England.

Chapter 621 Acquisition of T-Mobile
T-Mobile is currently the fourth largest telecommunications operator in the United States, ahead of it are AT&T, Verizon and Sprint.

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

At the same time, Deutsche Telekom is also interested in selling T-Mobile, which is the basis for the two sides to start negotiations.

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

Deutsche Telekom, known as the "German Tank", entered the American market in 2001 by acquiring VoiceStream Wireless and Powertel. At that time, the American telecommunications market was in a rapid development stage and was full of opportunities for Deutsche Telekom.

However, such a market is also full of competition.

In 1996, the FCC, the U.S. telecommunications regulatory agency, created a relaxed competitive environment by relaxing regulations. Competitors of all sizes emerged like mushrooms after a rain, and the competition situation was extremely fierce.

In addition, with the rise of emerging forces such as Apple and Android in recent years, operators in the United States have been the first to be hit. Foreign operators such as Deutsche Telekom that are trying to make money in the American market are in a relatively bleak operating condition.

You know, AT&T obtained the exclusive sales rights for the iPhone in North America because it invested in Apple in advance.

Although the sales volume of Honor Mate mobile phones is not inferior to that of iPhone, 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 does not have any advantage in the competition with Sprint and Verizon. Instead, AT&T has seized part of the market share because it has the exclusive sales rights of the iPhone.

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

T-Mobile America has seen profits decline in four of the past five years, and about 5 users abandoned T-Mobile and switched to other operators in 4.

Meanwhile, AT&T, Sprint and Verizon all saw increases in subscribers.

In this case, selling T-Mobile becomes Deutsche Telekom's last resort.

Moreover, due to the impact of the subprime mortgage crisis, it has become more difficult to obtain bank financing, which will cause the telecommunications industry's operating conditions to deteriorate.

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

Currently, the only disagreement between O2 Telecom and Deutsche Telekom is the acquisition price.

At its peak, T-Mobile USA's market value was close to $400 billion. However, with its declining performance and the impact of the subprime mortgage crisis, its stock price has fallen by more than 35% from its peak last year, and its market value is less than $260 billion.

"I believe that selling T-Mobile's U.S. business will help your company focus on more growth markets. Mobile Internet is still in its early stages, and making the right choice is very important."

After hearing what Barron said, even though this was indeed their idea, Deutsche Telekom CEO Lenny Obermann still asked:
"Then why did you choose to enter the North American market, Your Highness?"

"Because in terms of market size, O2 Telecom is not involved in many markets now. Entering the North American market through acquisition is also a good method. 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 is not the only one." Deutsche Telekom currently operates in about 50 countries around the world, most of which are in Western and Central Europe, while its subsidiary T-Mobile's business covers North America and Northern Europe. This time, O2 Telecom is preparing to acquire T-Mobile USA, which is its North American branch.

Compared with the scale of Deutsche Telekom, O2 Telecom is much smaller and currently only involves the markets in Western and Eastern Europe. What Baron said, in Lenny Obermann's view, is somewhat youthful.

This is not difficult to imagine. After all, Barron is not even 30 years old yet, but he has already achieved amazing success and owns a huge industry. Under such circumstances, it is very normal for him to be confident and even arrogant.

But Barron also pointed out one thing: T-Mobile is not the only option for O2 Telecom.

This is indeed the case. In addition to T-Mobile, Sprint or Virgin Telecom's American branch can also be included in O2 Telecom's acquisition options.

Take Sprint as an example. Its current scale and market share are slightly higher than T-Mobile, and it ranks as the third largest telecommunications operator in the United States.

In Baron's previous life, after Sun Zhengyi achieved success by acquiring Vodafone Japan, he chose to acquire Sprint and enter the American market after a period of time, trying to replicate his success in the Japanese telecommunications industry with Sprint.

But the acquisition of Sprint did not satisfy Sun Zhengyi...

But for now, acquiring Sprint can still be one of O2 Telecom's alternative options.

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

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

But at the same time, Deutsche Telekom still lists O2 Telecom as the first buyer of their subsidiary T-Mobile.

This is because although O2 Telecom's bid was not the highest, they were willing to pay all cash for the acquisition.

AT&T and Sprint's acquisition plans are both based on stock acquisitions, and these two companies are already 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, so its acquisition of T-Mobile USA will not involve monopoly, and relevant regulatory approval will be easier.

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

This time, O2 Telecom will form a consortium with Caesars Fund to acquire T-Mobile, and there will also be support from Standard Chartered Merrill Lynch. M&A projects like this are very popular with investment banks. Through the consulting and financing services, investment banks that undertake these projects can often obtain good returns.

So for Barron, it is natural that "good things should be kept within the family", especially after the merger with Merrill Lynch. The current Standard Chartered-Merrill Lynch also has very rich experience in this business.

O2 Telecom's asking price for T-Mobile is US$275 billion. Although this price is not much higher than T-Mobile's current market value, it is still quite competitive considering the current market situation and the fact that it is an all-cash acquisition.

But Deutsche Telekom is not satisfied with the offer. They hope to sell T-Mobile for $300 billion so that they can obtain sufficient liquidity and promote a share repurchase plan while their stock price is currently low to boost investor confidence.

So between these two bids and asking prices, the two sides continued to negotiate.

(End of this chapter)