T-Mobile USA Said to Be Target of Trujillo Buyout Attempt

Former telecommunications executive Sol Trujillo is trying to drum up interest in a buyout of Deutsche Telekom AG (DTE)’s T-Mobile USA unit and has so far been unsuccessful in pitching a deal to private-equity firms including Blackstone Group LP (BX) and KKR & Co., (KKR) according to people with knowledge of the matter.

The former head of phone companies U.S. West Communications, Orange SA and Australia’s Telstra Corp. (TLS) has approached the firms about bidding for all or part of T-Mobile USA, the country’s fourth-largest wireless carrier, said the people, who asked not to be identified as the talks are private.

The private-equity firms that have held preliminary discussions with Trujillo have reacted with skepticism to the proposal due to its size and cost of financing, the people said. The unit may now be worth $30 billion, with its mobile-phone frequencies the most valuable element, said Atlantic Equities analyst Christopher Watts.

T-Mobile USA has closed call centers and cut jobs to reduce costs after a $39 billion sale to AT&T Inc. (T) failed last year because regulators opposed the combination. Deutsche Telekom, based in Bonn, is seeking to reduce its exposure to the U.S. as it lags behind Verizon Wireless and AT&T in winning clients in the largest mobile market.

‘Cheap Financing’

Trujillo has also sought private-equity interest in a takeover of No. 3 operator Sprint Nextel Corp. (S), one person said.

Sprint Nextel yesterday rose 2.5 percent to $4.92 in New York trading. Deutsche Telekom ended Frankfurt trading little changed at 9.20 euros.

“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.”

Reached by telephone, Trujillo declined to comment. Representatives of Deutsche Telekom, Sprint, KKR and Blackstone declined to comment.

Deutsche Telekom remains open to a whole or partial sale of its U.S. division and would use the money to invest in its European assets, which include mobile businesses in Germany, the U.K. and the Netherlands, according to a person familiar with the matter. A sale to private-equity investors hasn’t been discussed by Deutsche Telekom’s board, the person said.

The German company earlier this year discussed a combination of its U.S. business with MetroPCS Communications Inc. (PCS), people familiar with those talks said in May.

Data Demand

Wireless operators in North America and Europe are struggling to find new sources of growth as the popularity of smartphones reaches a plateau and network costs rise to meet demand for mobile video and music.

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.

Trujillo, 60, has run telecommunications businesses on three continents, getting his start at AT&T Corp., then known as Ma Bell, before its 1984 breakup. He eventually became chief executive officer of U.S. West, one of the seven Bell operating companies, and later ran French mobile operator Orange for a year.

After Orange’s takeover by France Telecom SA (FTE), Trujillo in 2005 became the CEO of Melbourne-based carrier Telstra, from which he resigned in 2009 after a tenure marked by clashes with the Australian government over telecommunications regulation.

Regulatory Concerns

A stand-alone deal to buy T-Mobile might face fewer obstacles from regulators than the AT&T acquisition. U.S. competition authorities were concerned that combining T-Mobile with AT&T, the second-largest U.S. wireless carrier, would reduce competition.

AT&T CEO Randall Stephenson and Deutsche Telekom CEO Rene Obermann ultimately agreed the costs of continuing to fight for the deal were too high after the U.S. Justice Department sued to stop the combination, a person familiar with the matter said at the time. The company also faced possible opposition from the Federal Communications Commission.

To contact the reporters on this story: Matthew Campbell in London at mcampbell39@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net

To contact the editors responsible for this story: Jacqueline Simmons at jackiem@bloomberg.net; Jeffrey McCracken at jmccracken3@bloomberg.net; Nick Turner at nturner7@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

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