SoftBank To Buy T-Mobile [REPORT]

SoftBank Corp (OTCMKTS:SFTBF) (TYO:9984) is preparing to acquire U.S. wireless carrier T-Mobile and is discussing funding for a deal with financial institutions.

SoftBank To Buy T-Mobile [REPORT]

According to the Nikkei news agency, the Japanese telecom giant is moving to acquire fourth-ranked American wireless carrier T-Mobile US Inc (NYSE:TMUS), and the purchase would boost the SoftBank group’s revenue from mobile operations to 7 trillion yen a year, making it the world’s No.2 carrier, behind China Mobile Ltd. (NYSE:CHL) (HKG:0941).

Sprint Corp. may take majority stake in T-Mobile

Earlier this year, the Federal Communications Commission has voted in favor of SoftBank Corp (OTCMKTS:SFTBF) (TYO:9984)’s acquisition of Sprint Nextel Corporation.

According to Reuters report, SoftBank Corp (OTCMKTS:SFTBF) (TYO:9984) is now looking to have its recently acquired U.S. unit Sprint Corporation (NYSE:S) take a majority stake in T-Mobile from the latter’s parent Deutsche Telekom AG (OTCMKTS:DTEGY) (FRA:DTE) (ETR:DTE) in the financial year starting April.

According to media reports, the deal would be valued at about $20 billion – in line with the $21.6 billion SoftBank Corp (OTCMKTS:SFTBF) (TYO:9984) paid for Sprint this summer. The deal would help the Tokyo-based company leapfrog U.S. rivals Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. to become the world’s No.2 mobile carrier by revenue.

SoftBank In discussion with banks

Masayoshi Son, SoftBank’s billionaire founder and the third-richest person in Japan, approached six banks over the weekend to discuss financing the T-Mobile bid. According to a Bloomberg report, the institutions approached for the deal – Credit Suisse Group AG (NYSE:CS), Mizuho Bank Ltd, Goldman Sachs Group Inc (NYSE:GS), Deutsche Bank AG (NYSE:DB) (FRA:DBK),  JPMorgan Chase & Co. (NYSE:JPM) and Raine Group LLC – are the same ones that financed and advised SoftBank’s purchase of Sprint last July.

The plan would be to take control of T-Mobile by paying cash for the 67% stake owned by Deutsche Telekom AG (OTCMKTS:DTEGY) (FRA:DTE) (ETR:DTE). Sprint would then be integrated with T-Mobile, combining the third and fourth-largest U.S. wireless carriers.

However, regulatory concerns place a shadow on the feasibility of the transaction, given that two years ago a $39 billion proposal by AT&T Inc. (NYSE:T) was rejected by the Department of Justice on anti-trust considerations.

In their research note issued last week, Citi analysts for Telecom led by Michael Rollins indicated: “We believe the industrial and financial logic of a large scale industry consolidation scenario makes compelling sense for Sprint Corporation (NYSE:S). We view the key opportunity for Sprint Corporation (NYSE:S) is to leverage a merger with T-Mobile US Inc to improve marketing scale relative to Sprint Corporation (NYSE:S) and AT&T Inc. (NYSE:T) which we view contributes to the most significant variance between Sprint’s OIBDA margin and its two largest competitors once the company captures the full savings from Network Vision”.



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Mani
Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports