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Featured: Trujillo Private Equity buyout for T-Mobile?

August 11, 2012 - Written By Alexander Maxham

Well it looks like former Telecommunications executive Sol Trujillo is working to find private-equity firms interested in buying out part of all of T-Mobile USA. Trujillo is the former head of other phone companies including U.S. West Communications, Orange SA, and Australia’s Telstra. It’s been reported that Trujillo has approached at least two firms KKR & Co and Blackstone Group LP about a buyout of T-Mobile which is currently the nation’s fourth largest carrier.

Bloomberg reported the groups that have had preliminary discussions with Sol Trujillo have “reacted with skepticism to the proposal due to its size and cost of financing”. It’s said that T-Mobile USA is worth about $30 billion, and it’s spectrum is worth the most.

But it’s not just about T-Mobile here, Trujillo is said to be in talks with firms about taking over the nation’s third largest carrier, Sprint:

“Financing is cheap right now. But even though it’s possible, it doesn’t mean that such a deal is going to happen,” said Tom Taulli, a Newport Beach, California-based consultant for mergers and acquisitions. “We’ve not seen many $10 billion- plus leveraged buyouts anywhere.”

Deutsche Telekom, the owners of T-Mobile, are still open to a partial or complete sale of T-Mobile USA and that they’d use the money to further their operations in Europe. But it looks like a private-equity sale has not been discussed with Deutsche Telekom’s board yet.

With U.S. carriers struggling to accommodate surging data use in big cities, most potential buyers “would find T-Mobile’s spectrum far more compelling than its customer base,” said Atlantic Equities’ Watts.

So I guess the real question is, when will T-Mobile USA be partially or fully bought out? AT&T already tried but they weren’t successful, as it would reduce competition especially among GSM carriers in the US. Currently only AT&T and T-Mobile are GSM carriers, other than some of the pre-paid options out there. Currently T-Mobile USA is in the middle of selling about 7,000 US towers which would create $2-3 billion to reinvest in their US network. T-Mobile is also supposedly working on bringing LTE next year.

For now it looks like any buyout rumors will be about T-Mobile, as they are having trouble with the big carriers like Verizon, AT&T and Sprint, they are also having trouble competing against the smaller pre-paid and no contract carriers like Metro PCS, Boost Mobile and Straight Talk. Although T-Mobile does have some good pre-paid plans, I’m not sure if that can keep them afloat.

[Source: Bloomberg, Fierce Wireless]