What a surreal few weeks for the US mobile sector. A French company lobs a low-ball bid for T-Mobile US Inc. across the Atlantic, Sprint Corp. (NYSE: S) withdraws from the race to buy its rival US wireless operator and names a new CEO, while T-Mobile's larger-than-life CEO engages in the sort of public name-calling more often associated with a school playground. (See Iliad Offers $15B for a Stake in T-Mobile, Sprint Drops Bid for T-Mobile – Reports , Hesse Out, Claure In: Sprint Is Son's House Now! and T-Mob's Legere Unleashed: 'Total Chaos at Sprint'.)
For some, the most bizarre part of this is the bid for a majority stake in T-Mobile US from French alternative operator Iliad (Euronext: ILD). It's very likely that, because Iliad is a largely unknown entity in the US, its takeover offer looks low, and its bid comes with an unexplained promise of $10 billion in synergies, that it will be seen as little more than a distraction, a joke.
That's the kind of reaction that met Iliad when it announced it would use the brand "Free" to unbundle access lines and offer its own triple-play services in France more than a decade ago. Not only that, the company decided it would build its own DSLAMs, rather than buy from the traditional broadband infrastructure vendors, as well as make its own customer premises equipment (set-top box and broadband router).
Crazy? It turned out to be inspired. The company was in control of its own service delivery platform, enabled service differentiation at the home by building boxes to its own specs and service strategy, and saved money in the process. It leveraged its lower opex to offer lower prices to customers, and the French lapped it up: The company quickly became the number two player in the French fixed broadband services market, adding tens of thousands of customers per week, offered its stock in an IPO, and started planning a fiber-based strategy, prompting gags (in the Light Reading European offices, at least) such as, "Iliad is going to offer fiber-to-the-Homer." (See Shares for Free! and Iliad Launches 1Gig Broadband in France.)
It then turned its attentions to the French mobile sector. By this time its rivals were certainly taking it very seriously, and rightly so. Iliad's mobile strategy decimated the incumbent players, forcing them into defensive and sometimes aggressive tactics as Free Mobile also caught the imagination of the French public. In fact, Iliad's mobile strategy has been so successful, it was a major catalyst for the current industry consolidation underway in France. (See Eurobites: Orange in French M&A Talks, Euronews: FT's Q1 Suffers Free Fall and Iliad Disrupts the French Mobile Scene.)
Today, Iliad has 5.7 million broadband customers, 8.6 million mobile customers, and an annualized revenues rate of €4 billion (US$5.35 billion).
The lesson to be learned here is that the Iliad team are not fly-by-night fools naively trying to punch above their weight. It may be small but it packs a very hard punch. And as fans of The Iliad would probably never say, the French upstart has a track record that suggests if it doesn't at first succeed with a bid, it will likely Troy, Troy again… (See Eurobites: Iliad Could Team Up for T-Mob Pursuit.)
— Ray Le Maistre, , Editor-in-Chief, Light Reading