Sprint Corp is said to be finalising its offer to take over smaller rival T-Mobile US from Deutsche Telekom and has reportedly lined up eight banks to finance the potential acquisition. Sprint has arranged a US$20bn bridge loan from its Japanese owner…
Sprint Corp is said to be finalising its offer to take over smaller rival T-Mobile US from Deutsche Telekom and has reportedly lined up eight banks to finance the potential acquisition.
Sprint has arranged a US$20bn bridge loan from its Japanese owner Softbank and a US$20bn refinancing of T-Mobile’s debt pile, according to a Reuters report which cited people familiar with the matter.
America’s number three mobile operator has tapped JP Morgan, Goldman Sachs, Deutsche Bank, BofA Merrill Lynch, Citigroup, Mizuho, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui, according to the report.
The telcos were said to be looking to confirm the finer points of the financing in the next month so they can announce a deal around August.
It emerged previously that Sprint and Deutsche Telekom had agreed a deal in principal whereby Sprint would pay US$40 for each of T-Mobile’s shares and value the operator as a whole at US$32bn.
It was said that the consideration would be split 50/50 between stock and cash, and that the German incumbent would keep a 15% to 20% stake in the merged operator.
The consensus among analysts is that the deal is more likely to be rejected by the Department of Justice (DOJ) and the Federal Communications Commission (FCC) than approved. Due to the regulatory concerns, Sprint is reported to have agreed to pay T-Mobile US$2bn as a reverse break-up fee, while Deutsche Telekom will have to pay Sprint US$1bn if they decide to go with a different buyer.
Masayoshi Son, chair of Sprint’s parent Softbank, was said to have been wary of setting a high termination fee. He felt the US$6bn AT&T pledged to pay T-Mobile in its doomed takeover attempt in 2011 gave regulators an incentive to block the merger as the proceeds from the break fee would lead to a stronger fourth player in T-Mobile.
Earlier this week Son was asked whether the regulator’s resistance to the deal had changed at all. He replied by saying there had been “new movement” in recent months, without elaborating.
The operators see an opening to put their deal in front of regulators following mega-transactions between AT&T and DirecTV, and Comcast and Time Warner Cable.
If these transactions are approved by the regulator then America’s number three mobile operator, Sprint, would be left as an even smaller player than it already is in the wider sector.
Part of their case will be presenting to the authorities how the companies’ future’s will pan out if they and T-Mobile remain independent compared to if they join forces, although these models are still being worked on.
The operators will argue that AT&T and Verizon Communications represent a duopoly in the market – both with more than 100 million subscribers – and that they are only getting stronger.
