& cplSiteName &

SoftBank, DT to Start Talks on Sprint, T-Mobile Merger – Report

Iain Morris
2/20/2017
100%
0%

Japan's SoftBank may be willing to cede control of Sprint to rival T-Mobile US, itself majority owned by Germany's Deutsche Telekom, if such a move would help to seal a merger between the two US mobile operators, according to a report from Reuters that cites sources close to the matter.

SoftBank Corp. and Deutsche Telekom AG (NYSE: DT) are expected to begin discussions about a possible deal in April after the spectrum auction that is currently underway draws to a close, say Reuters' sources.

Regulatory rules prohibit rivals from entering into discussions during an auction process.

A tie-up between T-Mobile US Inc. and Sprint Corp. (NYSE: S) would produce a much stronger rival to market leaders AT&T Inc. (NYSE: T) and Verizon Wireless but would leave the US with just three national mobile network operators, reducing competition in the market.

Competition concerns have prompted regulatory authorities to block previous attempts to merge the two operators, but telecom executives have expressed optimism that a new and more business-friendly administration under President Donald Trump may be prepared to wave through deals of this nature.

Stoking merger speculation, SoftBank CEO Masayoshi Son was earlier this month reported to have told reporters in Japan that Trump had given him assurances he would "ease various restrictions … that make it easier to do business." Perhaps hoping to grease the wheels of a potential deal, Son has also promised to return to the US about 5,000 overseas positions at Sprint -- a move that would delight Trump supporters concerned jobs have been lost to low-cost foreign markets. (See SoftBank's Son & Trump: Marriage of Expedience.)

In late 2016, T-Mobile CFO Braxton Carter told financial analysts at a UBS event that "it's hard to imagine there's not going to be more openness to consolidation" during the Trump era. (See T-Mobile CFO on Trump: Expect More Consolidation & More Competition.)

Nevertheless, it seems the shape of a deal could be very different from when it was last mooted about two and a half years ago.

Back then, T-Mobile was valued at approximately $30 billion, and a transaction would have left SoftBank in control of the combined entity, turning Deutsche Telekom into a minority shareholder.

T-Mobile's market capitalization has since risen to more than $50 billion following successive quarters of customer growth that have seen it overtake Sprint to become the country's third-biggest mobile operator.

Following a boost to its share price on Friday, after the Reuters story broke, Sprint is currently worth about $38 billion -- little more than its market capitalization back in 2014.

Deutsche Telekom CEO Timotheus Höttges is also reported to have recently played down interest in an outright T-Mobile sale. That is perhaps unsurprising: Although it seems incongruous with Deutsche Telekom's overarching strategy of being central Europe's leading operator, T-Mobile remains the only part of the Deutsche Telekom Group delivering sales growth.


For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.


A deal that left Deutsche Telekom in control of a much larger business could therefore hold plenty of appeal for the German telco, which has repeatedly complained that T-Mobile ultimately lacks the scale to challenge AT&T and Verizon in the long run. Moreover, analysts cited in the Reuters report reckon a merger between T-Mobile and Sprint could generate "synergies" of between $25 billion and $30 billion.

As for SoftBank, it seems likely to have decided that being a minority shareholder in a more muscular operator is preferable to controlling one that is struggling. Despite recent signs of improvement at Sprint, the operator reported a 5% year-on-year drop in service revenues in the last three months of 2016, to $6.3 billion, and recorded a net loss of $479 million, compared with one of $836 million a year earlier.

T-Mobile, by contrast, saw its service revenues grow 11% in the fourth quarter, to $7.2 billion, and its net income rise 31%, to $390 million.

On the Nasdaq, T-Mobile's share price closed up 5.46% on Friday, at $63.92, while Sprint's ended the day up 3.28% on the New York Stock Exchange, at $9.30.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
KBode
50%
50%
KBode,
User Rank: Light Sabre
2/22/2017 | 3:27:53 PM
Merger...
Interesting to see Softbank promising to let DT have general control over the merged entity to get the deal done. I have a feeling DT may not want to sell after TMO's recent successes. And if they do, it will likely be Comcast or Charter that's willing to spend the kind of cash they'd like. 
Featured Video
From The Founder
Light Reading is spending much of this year digging into the details of how automation technology will impact the comms market, but let's take a moment to also look at how automation is set to overturn the current world order by the middle of the century.
Flash Poll
Upcoming Live Events
November 30, 2017, The Westin Times Square
March 20-22, 2018, Denver Marriott Tech Center
May 14-17, 2018, Austin Convention Center
All Upcoming Live Events
Infographics
SmartNICs aren't just about achieving scale. They also have a major impact in reducing CAPEX and OPEX requirements.
Hot Topics
Nokia Bell Labs & Verizon Stretch Fixed 5G to the Home
Dan Jones, Mobile Editor, 11/13/2017
Eurobites: Telefónica Reckons Plastic Is Fantastic for FTTH
Paul Rainford, Assistant Editor, Europe, 11/15/2017
Juniper's New Contrail VP Hails From Google
Craig Matsumoto, Editor-in-Chief, Light Reading, 11/15/2017
Animals with Phones
Why Cats Don't Run Tech Support Click Here
Live Digital Audio

Understanding the full experience of women in technology requires starting at the collegiate level (or sooner) and studying the technologies women are involved with, company cultures they're part of and personal experiences of individuals.

During this WiC radio show, we will talk with Nicole Engelbert, the director of Research & Analysis for Ovum Technology and a 23-year telecom industry veteran, about her experiences and perspectives on women in tech. Engelbert covers infrastructure, applications and industries for Ovum, but she is also involved in the research firm's higher education team and has helped colleges and universities globally leverage technology as a strategy for improving recruitment, retention and graduation performance.

She will share her unique insight into the collegiate level, where women pursuing engineering and STEM-related degrees is dwindling. Engelbert will also reveal new, original Ovum research on the topics of artificial intelligence, the Internet of Things, security and augmented reality, as well as discuss what each of those technologies might mean for women in our field. As always, we'll also leave plenty of time to answer all your questions live on the air and chat board.

Like Us on Facebook
Twitter Feed
Partner Perspectives - content from our sponsors
The Mobile Broadband Road Ahead
By Kevin Taylor, for Huawei
All Partner Perspectives