Wednesday, 08 April 2020

SoftBank takes one for the team as Sprint–T-Mobile merger terms rebalanced

by Harry Baldock, Total Telecom
Friday 21 February 20

The merger of the US’ third and fourth-place operators was finally approved earlier this month, but SoftBank has had to cut its stake to get the deal done

After being in legislative limbo for what seems like forever, the merger of Sprint and T-Mobile was finally given the go ahead by the judge on the 11th of February.    However, since the deal was first proposed in 2018, the performance of the two companies have diverged significantly…

After being in legislative limbo for what seems like forever, the merger of Sprint and T-Mobile was finally given the go ahead by the judge on the 11th of February. 
 
However, since the deal was first proposed in 2018, the performance of the two companies have diverged significantly, leaving Deutsche Telekom, the parent of T-Mobile US, unhappy with the previous terms.
 
Under the original deal, SoftBank, owner of Sprint, would hold 27% of the newly combined entity, while Deutsche Telekom would hold 42%.
 
However, at Deutsche Telekom's urging the deal has since been renegotiated, seeing SoftBank agreeing to 24%. Meanwhile, Deutsche Telekom gained an additional percentile, increasing their holding to 43%. 
 
As part of the deal, SoftBank has agreed to surrender 48.8 million T-Mobile shares to the newly created company, also be called T-Mobile. These shares will be reissued to SoftBank if the new T-Mobile’s stock price increases to $150 by the end of 2025. This represents an increase in value of around 50%, with the stock’s current value around $100.
 
This is a considerable concession on behalf of SoftBank, but clearly getting the merger moving is more appealing for the debt-ridden Sprint than large scale renegotiations.  
 
“SoftBank has confidence in the proven, execution capabilities of the combined Sprint and T-Mobile teams to build one of the world’s most advanced, nationwide 5G networks and execute the new company’s business plan,” said Marcelo Claure, a SoftBank board member. “These and other factors give [SoftBank Group] full confidence that it will recover all of the surrendered shares.”
 
The combined value of the new T-Mobile is estimated to be around $120 billion, just below half that of the next largest US operator Verizon.
 
The companies now hope to close on the 1st of April.
 
 
Also in the news:

Since you're here...

...the Telecoms industry is characterised by constant change and evolution. That's why it's crucial for telecoms professionals to keep up-to-date with what is happening. Join 35,000+ of your peers and sign up to our free newsletter service today, to be in the know about what is going on. PLUS, as a member you can submit your own press releases!

See all membership options

Please enable JavaScript to view the comments powered by Disqus.

Newsletter signup

Quickly get on board and up to date with the telecoms industry