Softbank willing to sacrifice control in Sprint tie-up

Japan’s SoftBank Group is prepared to give up control of Sprint to Deutsche Telekom’s T-Mobile US to clinch a merger of the two US wireless carriers, according to people familiar with the matter.

SoftBank has not yet approached Deutsche Telekom to discuss any deal because the US Federal Communications Commission has imposed strict anticollusion rules that ban discussions between rivals during an auction of airwaves.

When the auction ends in April, the two parties are expected to begin negotiations, the sources said last week.

Two-and-a-half years ago, SoftBank abandoned talks to acquire T-Mobile for Sprint amid opposition from US antitrust regulators. That deal would have seen Deutsche Telekom retain a minority stake in T-Mobile, down from about 65%.

Deutsche Telekom CE Tim Hoettges has said in recent months that the German company is no longer willing to part with T-Mobile, prompting SoftBank to explore a new strategy to achieve a potential combination, the people said.

SoftBank, which owns about 83% of Sprint, has been frustrated with its inability to grow significantly in the US on its own, where both Sprint and T-Mobile have struggled to compete with Verizon Communications and AT&T, the two largest US carriers with much deeper pockets.

Investors have said a merger between T-Mobile and Sprint, ranked third and fourth respectively, would still face antitrust challenges, but made strategic sense as the industry moves to fifth-generation wireless technology. Carriers will need to spend billions of dollars to upgrade to 5G networks that promise to be 10 times to 100 times faster than current speeds. While SoftBank is still open to discussing other options, it is now willing to surrender control of Sprint and retain a minority stake in a merger with T-Mobile, the sources said. They asked not to be identified because the deliberations are confidential.

SoftBank, Sprint, Deutsche Telekom and T-Mobile all declined to comment. “We may buy, we may sell. Maybe a simple merger, we may be dealing with T-Mobile, we may be dealing with totally different people, different company,” SoftBank CE Masayoshi Son told analysts on the company’s latest quarterly earnings.

With the advent of 5G, Deutsche Telekom may receive offers for T-Mobile from other US firms, such as Dish Network and Comcast. Sprint could also be an acquisition target for other companies, the sources said.

Dish declined to comment and Comcast did not immediately respond to a request for comment.

Reuters could not determine how much of a premium SoftBank may want Deutsche Telekom to pay for control of Sprint, which has a current market valuation of $36bn.

T-Mobile’s market value stands at $50bn, which is about $20bn higher than when it was last in merger talks with Sprint in 2014. While Sprint’s market value has changed little since then, T-Mobile has overtaken Sprint as the third-largest wireless customer in terms of numbers of subscribers.

T-Mobile said it had 71.5million customers while Sprint had 59.5-million at the end of 2016./Reuters

CARRIERS WILL NEED TO SPEND BILLIONS TO UPGRADE TO 5G NETWORKS PROMISING TO BE 10 TO 100 TIMES FASTER