Report: T-Mobile USA targeted for private equity buyout

After being unable to close on its sale to AT&T last year thanks to the Justice Department, T-Mobile USA might be in play again after all. Bloomberg reports that former telecommunications executive Sol Trujillo has approached private equity firms like the Blackstone Group and KKR in an effort to generate interest in a buy-out of all or part of T-Mobile USA. Trujillo, the former head of U.S. West, Orange SA and Telstra Corp. has so far has found no interest in an acquisition of the nation's fourth largest carrier.

The private equity firms who have heard the pitch are said to be skeptical because of the size and cost of financing it. Atlantic Equities analyst Christopher Watts puts a value of $30 billion on the unit and says that its mobile phone frequencies are the most valuable part of the company. T-Mobile has sought to cut-back its spending by closing call-centers and jobs. Last year's $39 billion offer from AT&T to buy the carrier was rejected by U.S. regulators and T-Mobile owner Deutsche Telekom has decided to lower its exposure to the States.

Meanwhile, Trujillo also has tried to drum up support for a leveraged buyout of Sprint. Private equity firms like KKR and Blackstone favor LBO's which uses leverage to purchase a company for as little money down as possible, financing the balance from money raised from selling off non-essential components and using cash flow from operations. The major part of an LBO is getting a source of cheap financing and according to Tom Taulli, an M&A consultant, financing is currently cheap. But that doesn't mean that a deal will get done. Taulli points out that there haven't been many $10 billion plus LBOs lately.

While Deitsche Telekom refused to comment on the story, the company is allegedly open to a sale of all or part of its U.S assets including T-Mobile, and would prefer to invest in its European operations. A person with inside knowledge says that Deutsche Telekom's board has not discussed a sale of T-Mobile to any private equity firm.

source: Bloomberg