The past few weeks we have seen two major wireless transactions announced. First Deutsche Telecom backed T-mobile announced an acquisition MetroPCS and late last week the Japan’s Softbank announced it was paying $20 billion for a 70% interest in Sprint. Why does foreign firms find US wireless companies so attractive? On first blush, it does not make a lot of sense as there are no obvious operational synergies between wireless companies in different countries with difference languages.
Part of the issue appears to be that its not the US companies that are so attractive, but rather that their home markets are less attractive. The wireless markets in both Japan (and most of Asia) and Germany (as well as most of Europe) are more mature. Moreover their economies appear to be stagnating. These companies appear to be desperately looking for growth and the US is one of the few wealthy countries with significant growth potential, on relative basis.
But the bigger question is why other US media and communications companies, who have potentially much greater synergies, are not stepping up to the plate in bidding for the wireless companies? The synergies between a major cable or DBS operator and a wireless company could be huge — a single bill, customer support, bundled packages etc. Maybe such alliances are the next step for the foreign owners?
The only explanation I can think of right now is that the foreign buyer have lower cost of capital in their home countries and it will be easier for them to finance the LTE rollout and that this gave them an edge in the bidding. Comments welcome.