Free-T-Mobile: Disruptive Revolution or a Bridge Too Far?

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Free’s shock bid for T-Mobile USA will stretch its finances and management capacity to the limit. Can Free’s package of tactics, technology, and procedures work in the US context?


Format: PDF filePages: 18 pagesCharts: 9Author: Alexander HarrowellPublication Date: August 2014

Table of Contents

  • Executive Summary
  • Free’s Bid for T-Mobile USA
  • T-Mobile: the state of play in Q2 2014
  • Free-Mobile: the financials
  • Indicators of a successful LBO
  • fr: a modus operandi for disruption
  • Surprise and audacity
  • Simple products
  • The technical edge
  • Obstacles to the Free modus operandi
  • Spectrum
  • Fixed-mobile synergy
  • Regulation
  • Summary
  • Two strategic options
  • Hypothesis one: change the circumstances via a strategic deal with the cablecos
  • Hypothesis two: 80s retro LBO
  • Problems that bite whichever option is taken
  • The other shareholders
  • Free’s management capacity and experience
  • Conclusion

Table of Figures

  • Figure 1: Revenue and margins in the US. The duopoly is still very much with us
  • Figure 2: Fully-developed disruption. Revenue and margins in France
  • Figure 3: T-Mobile’s return to underlying profitability – caused by moderating its smartphone bonanza somewhat
  • Figure 4: Postpaid ARPU falling steadily, while ABPU just about keeps up
  • Figure 5: T-Mobile’s supposed “decoupling” of devices from service has extended $3.5bn of credit to its customers, rising at $1bn/quarter
  • Figure 6: Free’s valuation of T-Mobile is at the top end of a rising trend
  • Figure 7: Example LBO
  • Figure 8: Free-T-Mobile in the context of notable leveraged buyouts
  • Figure 9: Free Mobile’s progress towards profitability has been even more impressive than its subscriber growth

Technologies and industry terms referenced include: Acquisitions, Cable company, Consolidation, Disruption, EBITDA multiple, fibre, Fixed-mobile,, fttx, Future Networks, Iliad, Innovation, LBO, Leverage, Leveraged buy-out, mobile, Next Generation Network, NGN, Small cells, spectrum, Strategies, Strategy, T-Mobile USA, Telco 2.0, Telecom, Telecommunications, wireless