Billionaire Niel Abandons T

Bloomberg News

Billionaire Xavier Niel's Iliad SA (ILD) scrapped its plan to acquire a majority stake in after the wireless carrier's owner Deutsche Telekom AG (DTE) refused to consider an improved bid.

The French phone company said its new offer is for 67 percent of T-Mobile and values the stock at $36 a share including cost savings, according to a statement today. Iliad's previous $15 billion cash bid, or $33 a share, for a 56.6 percent stake, was rejected in August as too low.

T-Mobile fell as much as 4.4 percent in New York trading. Iliad is the second suitor to walk away, after Japanese billionaire Masayoshi Son's Sprint Corp. unit called off a merger plan in the same month. Deutsche Telekom, which has long wanted to exit the U.S., is facing at least the third failed sale attempt in recent years, including a 2011 deal with that was later called off because of regulatory hurdles.

The decision followed 'exchanges with Deutsche Telekom and selected board members of T-Mobile US who have refused to entertain its new offer,' Iliad said in its statement.

Andreas Fuchs, a spokesman for Bonn-based Deutsche Telekom, declined to comment immediately. Anne Marshall, a spokeswoman for Bellevue, Washington-based T-Mobile, also declined to comment.

Private Equities

While a U.S. exit would have allowed Deutsche Telekom to focus on its European business, its board was recently split over whether the German carrier should sell its only growing asset, people familiar with the matter said last month. Deutsche Telekom is inclined to wait until after the Nov. 13 frequency auction before committing to a strategic decision on T-Mobile, the people said.

Iliad had held talks with potential partners including buyout firm to raise additional debt and equity, people familiar with the matter have said. In its statement today, Iliad said it put together 'a consortium with two leading private-equity funds and tier-1 international banks,' without identifying them. Iliad will continue its policy of 'profitable growth,' it said.

T-Mobile, which is just over 66 percent owned by Deutsche Telekom, fell 2.2 percent to $27 at the 2:12 p.m. New York time. Iliad dropped 1.8 percent to close at 156.15 euros in Paris, taking its decline to more than 20 percent since the company confirmed its interest in T-Mobile on July 31.

Dish Network?

Iliad's withdrawal leaves Charlie Ergen's , the U.S. satellite-TV provider that's expanding in wireless services, as a potential bidder.

Ergen, Dish's chairman, recently contacted Deutsche Telekom to say he is interested in a future acquisition of T-Mobile, people with knowledge of the matter said in early September. Dish, the second-largest U.S. satellite-TV provider, has told Deutsche Telekom that it may be interested in a deal after a November auction for U.S. wireless airwaves is completed, said the people.

Deutsche Telekom views Dish as a better acquirer than Sprint because it wouldn't rankle antitrust regulators by reducing the U.S. wireless market to three competitors from four, one person has said. Dish also may have more firepower to bid than Iliad, the person said.

French Market

Market-share gains in France, thanks to a strategy of winning users by slashing prices in mobile and fixed-line telecommunications, had pushed Iliad's stock in June to its highest level since its 2004 initial public offering.

Now, Iliad will be left focusing on France, where it's also faced setbacks in trying to expand its phone business through takeovers.

The carrier failed this summer to reach a deal with rivals Bouygues SA and Orange SA (ORA) to consolidate the French market. Earlier this year, Iliad tried to get its hands on Bouygues's mobile network as Bouygues sought to buy Vivendi SA's SFR -- only to have the plan scuttled when Vivendi sold SFR to Numericable Group SA instead.

A flurry of acquisitions in and beyond the telecommunications industry is being spurred by low investment yields and cheap borrowing rates. Phone companies are trying to combine as costs rise for high-speed fourth-generation networks while competition and regulatory pressures weigh on phone bills.

To contact the reporters on this story: Marie Mawad in Paris at mmawad1@bloomberg.net; Cornelius Rahn in Berlin at crahn2@bloomberg.net Kenneth Wong at kwong11@bloomberg.net;

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net