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SoftBank Said to Enter Direct Talks on Sprint-T-Mobile Deal

By Alex Sherman and Aaron Kirchfeld
January 18, 2014 11:52 PM EST 29 Comments
SoftBank Corp. founder and president Masayoshi Son is seeking to borrow about $20 billion from banks including Goldman Sachs Group Inc., Mizuho Bank Ltd. and Credit Suisse Group AG, people said last month.
Photographer: Junko Kimura/Bloomberg
SoftBank Corp. founder and president Masayoshi Son is seeking to borrow about $20 billion from banks including Goldman Sachs Group Inc., Mizuho Bank Ltd. and Credit Suisse Group AG, people said last month.

SoftBank Corp. (9984), which is seeking to combine its Sprint Corp. (S) unit with T-Mobile US Inc., has entered direct talks with T-Mobile’s owner Deutsche Telekom AG (DTE) to resolve obstacles to a potential deal, people with knowledge of the matter said.

While SoftBank has assurances from banks that financing for a deal will be available, an agreement could still take months to reach, one of the people said, asking not to be identified as the information is private. Unresolved issues include how much cash and stock SoftBank will pay for Deutsche Telekom’s 67 percent (TMUS) stake in T-Mobile, and how Sprint and T-Mobile will be integrated, two people said.

Deutsche Telekom wants an all-cash offer for T-Mobile, which has a market value of about $26 billion, and SoftBank is trying to finance a deal to provide as much cash as possible, one of the people said. SoftBank founder and president Masayoshi Son is seeking to borrow about $20 billion from banks including Goldman Sachs Group Inc., Mizuho Bank Ltd. and Credit Suisse Group AG, people said last month. Sprint would take on any debt relating to the deal, one person said.

Combining Sprint and T-Mobile would give each company a better chance of long-term success against AT&T Inc. and Verizon Communications Inc. Sprint’s management isn’t controlling deal talks and knows Son will make the decision on whether or not to push ahead with a deal, another person said. Sprint Chief Executive Officer Dan Hesse knew Son wanted to acquire T-Mobile when he agreed to sell SoftBank the majority of the company, the person said.

Beating Verizon

Deutsche Telekom hasn’t held any talks with Son or Sprint on its stake in T-Mobile, Bloomberg News reported Dec. 21, citing two people familiar with the matter.

No structure for a deal exists, and agreement must be reached at the boards of Deutsche Telekom, SoftBank, Sprint and T-Mobile, one of the people said. The deal may also face objections from regulators, people have said.

Spokesmen for Tokyo-based SoftBank and Bonn-based Deutsche Telekom couldn’t be reached to comment outside of normal business hours. Bill White, a Sprint spokesman, declined to comment as did Anne Marshall, a spokeswoman for T-Mobile.

Also still to be resolved are the size of a breakup fee in case regulators strike down a deal, two of the people said. AT&T Inc. had to pay roughly $7 billion in cash and assets when its agreement to acquire T-Mobile fell apart in 2011, following opposition from the U.S. Justice Department and Federal Communications Commission.

If SoftBank and Sprint suffer the same fate, they couldn’t afford that kind of penalty, people said last month. Son, who serves as Sprint’s chairman, has told banks he doesn’t want to pay a large breakup fee because the company is already carrying a lot of debt, one of these people said.

Dish Solution?

A Sprint bid for T-Mobile “would hit a lot of static from federal regulators and antitrust officials,” Jeff Silva, a Washington-based analyst with Medley Global Advisors, said in an interview. There isn’t “political appetite for seeing the national field reduced by one, especially if that one is a maverick carrier,” Silva said.

Dish Network Corp., the second-largest satellite TV provider in the U.S., could facilitate a combination of Sprint and T-Mobile, Jonathan Chaplin, an analyst at New Street Research, said in a note to clients.

If Sprint agrees to host Dish’s wireless airwaves on its network, allowing the satellite company to enter the mobile-phone business, regulators may approve a Sprint takeover of T-Mobile because a new competitor would emerge, Chaplin said. Sprint has begun to test a wireless Internet service with Dish in Corpus Christi, Texas, a potential prelude to a future partnership, Chaplin said.

“The companies could argue that this improves competition,” Chaplin said. “Sprint and T-Mobile, who have both been disruptive, would now have comparable scale to Verizon and AT&T, allowing them to price even more aggressively. In addition, by passing on low network costs to Dish, they would enable Dish to price their service aggressively and take share also.”

Dish spokesman Bob Toevs declined to comment.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Aaron Kirchfeld in London at akirchfeld@bloomberg.net

To contact the editor responsible for this story: Mohammed Hadi at mhadi1@bloomberg.net

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