It seems as though there should be a new rule in the world of business. That rule is, when attempting to acquire T-Mobile USA (NYSE:TMUS), just don’t do it. Iliad is the third such company to offer T-Mobile a buyout agreement to acquire the company or to merge with it in one way or another. First, AT&T’s offer went south, sparking T-Mobile’s latest renaissance. That was followed by Sprint/Softbank who had quite a bit of openly negative regulatory opposition and ultimately gave up. And now we have Iliad, who had originally given their offer shortly before Sprint/Softbank withdrew theirs.

In a statement on the company’s website, Iliad stated that they would be pulling their offer to buy 56.6% of T-Mobile USA from parent company Deutsche Telecom. The company’s $16 billion apparently wasn’t taken very seriously by T-Mobile’s board and was rejected by the board. Iliad then came back again, with an offer to buy 67% of the company at $36 per share. Iliad’s management believed that their second offer was a solid one and that it allowed T-Mobile to accelerate their growth as the fastest growing carrier in the US and to help them accomplish that with $2 billion in savings.

Iliad did not comment on T-Mobile’s response to their second offer, but we can only assume that it was equally negative, especially considering that this new deal is for a significantly larger piece of the company for what is now a $10 premium per share over the company’s current value. While it isn’t clear what T-Mobile’s share price will do in the future, there is no doubt that they’ve got a firebrand CEO who is not afraid to say what he thinks. He recently spoke at a technology conference and discussed the industry and T-Mobile’s competitors at length and with some unexpected profanity (unless you know how he speaks).

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Today is not a good day in Sprint land as according to a report the Wall Street Journal, the company’s board of directors has voted to abandon the acquisition of T-Mobile USA  amid insurmountable regulatory hurdles.

Sprint originally made an offer to buy T-Mobile USA to the tune of $32 billion dollars with the parent company of Sprint, Softbank, leading the negotiations and discussions about where the combined company would move post-merger.

The problem with this deal was that it was met with a lot of regulatory concern from virtually every single governmental agency involved, not to mention tons of public outcry. The Department of Justice (DOJ), Federal Trade Commission (FTC) and the Federal Communications Commission (FCC) all voiced differing levels of opposition towards the deal. Sprint and Softbank clearly did not have the political clout that Comcast did when they acquired NBC/Universal from General Electric (GE) to make such a controversial deal go through. Even so, the reality of the situation was fundamentally difficult to argue against because Sprint would effectively be reducing the mobile carrier market from four to three competitors and removing the most competitive carrier from contention. Softbank’s CEO, Masayoshi Son, contended that the combined company would be evermore competitive than T-Mobile US on its own, however his statements appear not have been enough to convince regulators.

T-Mobile was also recently approached with a second cash-only offer a week ago, which came from French telecom company Iliad, to the tune of $15 billion, not much lower than the valuation that Sprint had given them for the whole company. This deal would also likely encounter much less regulatory scrutiny because Iliad has no presence in the US market and such an acquisition would also allow Deutsche Telecom to almost entirely divest from T-Mobile US while simultaneously still having some investment to potentially generate additional profit.

Now that this deal has officially fallen apart (the second failed acquisition of T-Mobile by another carrier), there is a chance that T-Mobile could be acquired by Iliad, or that they could continue to drive forward and steal more customers. T-Mobile recently announced that it had over fifty million subscribers and that it had gained over 7.6 million new customers in the past five quarters or. The company also reported that its earnings had the greatest revenue growth of any carrier last quarter and that it does not see any signs of stopping. T-Mobile’s overall competitiveness is very likely what made regulators become hesitant of Sprint’s acquisition because of Sprint’s relative weakness against all other carriers.

Now that this deal has fallen apart there is also talk that Sprint’s current CEO, Dan Hesse, is to be put out to pasture. Hesse has been Sprint’s CEO for the past seven years and oversaw potentially one of the worst collapses of a carrier ever with their network coming in as the weakest of all four carriers year after year. While Sprint is certainly not in free fall, it has struggled to be a competitive carrier with AT&T and Verizon almost since its merger with Nextel in 2005. As such, it makes sense that Softbank would want to replace Hesse, especially considering that was supposedly already the plan with the T-Mobile acquisition since T-Mobile’s firebrand CEO John Legere would be expected to replace him.

Based on the news, T-Mobile’s stock dropped sharply by nearly nine percent while Sprint has taken a hammering of over 16%. Obviously, Sprint’s investors are more worried about not having T-Mobile and T-Mobile’s investors are disappointed that they don’t get a buy-out, even though there’s still a very good chance that the Iliad offer could still net them a significant bonus. It will be interesting to see what both companies will do in the wake of this announcement and whether or not Sprint can finally wake up and start being competitive with the others. T-Mobile will very likely continue to push forward as they have and introduce new disruptive programs to shake up the mobile industry.

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A French telecom company roughly 1/6th the size of T-Mobile US (in revenue and about 1/2 by market cap), by the name of Iliad has just put up an offer to buy 56% of T-Mobile US for an approximate $15 billion in cash. This would theoretically still leave some shares of T-Mobile US in Deutsche Telecom’s hands, but would mostly wash them of the company and give them cash (instead of a mixture of cash and shares, which is what Sprint is supposedly offering). As of right now, there are still no official figures for the T-Mobile/Sprint merger deal, so we don’t exactly know what T-Mobile is thinking or whether or not there is a better offer from Sprint. Since the announcement of the deal, I have been advocating that Sprint’s initial offer was too low for a competitor that is technically eating their cake and growing very competitively.

Iliad’s offer comes from their founder and CEO, Xavier Niel, who’s decision was unanimously approved by the company’s board. Iliad believes that because of their absolute and complete non-existence in the US market, they will not be subject to the regulatory scrutiny that other deals might have. For Deutsche Telecom and T-Mobile US, an Iliad deal would be much more straightforward and would very likely change very little in terms of how T-Mobile US is run. If T-Mobile US were to merge with Sprint, however, things would undoubtedly change and there would only be 3 carriers in the US, not 4. And there would be a lot of complexity and problems with unifying Sprint’s and T-Mobile’s networks on such a large scale. Especially considering how much trouble Sprint has had upgrading their network.

It remains to be seen whether or not T-Mobile’s board will even look at this deal, but I have a feeling that a lot of T-Mobile shareholders are going to look at it positively. Since the announcement, T-Mobile US’ shares have been up 5%, which would mean that investors are happy with this offer or at least that a second competing offer exists. Iliad’s offer isn’t really worse than Sprint’s, yes it does offer less money, but it offers more cash and more freedom to compete and operate independently. If absorbed into the Softbank/Sprint monster, there’s going to be a lot of job trimming (in Sprint and T-Mobile) and there will be less competition, no matter what Softbank’s CEO says. Fewer competitors almost always results in less competition, I simply don’t think anyone can argue that Sprint and T-Mobile together will be more competitive than T-Mobile is right now. Sure, they’ll be bigger and capable of generating more profit from economies of scale, but who says T-Mobile can’t get there by simply being continuing to be competitive?

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