Sprint Corporation (NYSE:S) is in talks with banks to make debt arrangements as it gears up to bid for T-Mobile US Inc (NYSE:TMUS). Sources familiar with the talks told Bloomberg that Sprint CFO Joe Euteneuer and treasurer Greg Block last month met with banks to secure the capital. Spring shares soared 7.06% in pre-market trading Thursday to $9.10, while T-Mobile stock went up by 9.25% to $32.
Sprint has been in talks with at least five banks
T-Mobile US Inc (NYSE:TMUS) has a market value of about $23.5 billion. Sprint Corporation (NYSE:S) plans to fund a big chunk of the deal with corporate bonds, syndicated loans and convertible bonds. Sources said that Sprint has met with at least five banks including JPMorgan Chase & Co. (NYSE:JPM), Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DB) and Goldman Sachs Group Inc (NYSE:GS). The carrier was also in talks with Citigroup Inc. (NYSE:C) and Japan’s Mizuho Financial Group Inc. (ADR) (NYSE:MFG) (TYO:8411).
Japan’s Softbank Corp (OTCMKTS:SFTBF) (TYO:9984) owns 80% stake in Sprint Corporation (NYSE:S). SoftBank CEO Masayoshi Son is said to launch an official bid in June or July. Deutsche Telecom, which has a 67% stake in T-Mobile US Inc (NYSE:TMUS), is reportedly interested in a cash deal. If the deal goes through, it will unite the third- and fourth-largest U.S. telecom operators. Then, Sprint will be in a better position to challenge AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ).
How will Sprint deal with regulators?
However, Sprint Corporation (NYSE:S) is likely to face headwinds from U.S. regulators. Federal authorities are against consolidation in the wireless market because that would inhibit competition. U.S. antitrust chief William Baer and Federal Communications Commission chairman Tom Wheeler have been the most vocal opponents to the deal. In 2011, regulators rejected the merger of AT&T Inc. (NYSE:T) with T-Mobile US Inc (NYSE:TMUS) on grounds that there must be at least four major players in the market to keep it competitive.
Sprint Corporation (NYSE:S) is confident that it can escape the regulators’ opposition by allowing Deutsche Telecom to retain part of its 67% stake in T-Mobile US Inc (NYSE:TMUS).