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.
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).
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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”.