PARIS (Reuters) - Relieved investors sent shares in French low-cost telecom operator Iliad (PA:ILD) up 12 percent on Tuesday in early trade after it abandoned an effort to buy the fourth-largest U.S. carrier T-Mobile.
Backed by billionaire founder Xavier Niel, Iliad made an initial bid worth $15 billion (9.34 billion pounds) and then raised it further, but was rebuffed by T-Mobile US (N:TMUS) parent company, Deutsche Telekom (DE:DTEGn). Sources told Reuters Deutsche Telekom was unconvinced by the price and by Niel's ability to run the business.
The aborted U.S. foray is seen favourably by Iliad investors because many would prefer Niel focus on organic growth at home and pursue mobile consolidation by reviving talks with struggling number three mobile player Bouygues (PA:BOUY).
Bouygues shares rallied 4.6 percent at 0711 GMT (08:11 a.m. BST). Shares of market leader Orange (PA:ORAN) also rose 1.4 percent since it would benefit along with rivals from a consolidation that would calm tough price competition.
The volume of Iliad shares changing hands in early trade was already at 75 percent of the daily average in the past three months.
"Now that Iliad has abandoned the U.S. deal, we think it likely that French consolidation hopes will return," wrote Berenberg analysts in a note.
"On our estimates, and in our very conservative M&A scenario, if Iliad pays 8 billion euros to acquire Bouygues Telecom, the deal would remain accretive to its shareholders – without taking into account the possible upside from market repair."
(Reporting by Leila Abboud, Gwenaelle Barzic, and Alexandre Bokenbaum-Granier; Editing by Andrew Callus)