T-Mobile, Sprint In Talks About A Merger Deal

Jack Paul September 20, 2017
T-Mobile, Sprint In Talks About A Merger Deal

T-Mobile is in active talks with Sprint about a merger, according to people close to the situation.

The U.S. wireless carrier is exploring the possibility of taking over rival Sprint in an all-stock deal after SoftBank Group Corp. offered to give up its majority ownership of Sprint, a person familiar with the matter said.

Both companies and their parents, Deutsche Telekom and Softbank, have been in frequent conversations about a stock-for-stock merger in which T-Mobile parent Deutsche Telekom would emerge as the majority owner.

People close to the situation stress that negotiators are still weeks away from finalizing a deal and believe the chances of reaching an agreement are uncertain. The two sides have not yet set an exchange ratio for a deal, but are currently engaged in talks to forge a term sheet.

The two companies have agreed, provided that John Legere, T-Mobile’s outspoken chief executive, would take over the combined company should there be a deal, according to the source, who asked not to be identified discussing confidential negotiations.

Both Sprint and T-Mobile did not immediately respond to requests for comment.

The latest negotiations come after a report this year came out, stating that Japan’s SoftBank was prepared to give up control of Sprint to clinch a merger with T-Mobile, and only retain a minority stake in the combined company.

T-Mobile and Sprint have had a seemingly endless involvement to each other over the years since Softbank took control of Sprint, pushed by the prospect of billions of dollars in cost interactions that a merger would bring.

The last time the two companies held meaningful talks earlier this year, Softbank's Masayoshi Son indicated a willingness to sell Sprint to T-Mobile.

This time, given the all-stock nature contemplated, Softbank would emerge as a large minority holder in any combination.

While T-Mobile CEO John Legere is expected to lead any combination that results from a merger, Son has made it clear he wants a say in how the company is run. That desire adds another layer of complexity to an already difficult transaction.

T-Mobile has not begun due diligence on Sprint, yet another step that could change current price expectations or the willingness to move forward.

The idea of a combination between the No. 3 and No. 4 carriers was shot down by regulators in 2014, but with a new administration preliminary discussions picked up earlier this year. Washington regulators appointed by President Donald Trump haven’t signaled an insistence on maintaining a four-player nationwide wireless market that was a feature of the preceding administration.

Approving any merger between the No. 3 and No. 4 wireless carriers in the nation by antitrust regulators by antitrust regulators is the biggest issue as the risk of rejection by the Department of Justice will play an important role in the final decision made by both sides as to whether they will proceed with a deal.

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Jack Paul


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