Softbank and Deutsche Telekom remain in negotiations regarding a merger between their subsidiaries Sprint and T-Mobile US according to Japanese news outlet Nikkei, but the companies remain at odds over certain issues. The German incumbent is said to be…
Softbank and Deutsche Telekom remain in negotiations regarding a merger between their subsidiaries Sprint and T-Mobile US according to Japanese news outlet Nikkei, but the companies remain at odds over certain issues.
The German incumbent is said to be worried that T-Mobile’s competitiveness will suffer if capital investment is put off during the regulatory period – which is expected to take at least one year – and then the deal is not approved.
It is yet to agree a compensation packet with Softbank for this eventuality and other issues are yet to be resolved, the report said. In June it was reported that the companies were hoping to announce a deal in August.
The Japanese group is looking to acquire more than 50% of T-Mobile stock through Sprint using cash and stock swaps to cover the reported Y1.7trn (US$16bn) consideration.
T-Mobile’s share price rose 1.89% on Friday on the back of the report, giving it a market capitalisation of US$26.9bn. T-Mobile has US$14.3bn in long-term debt and owes a further US$5.6bn to parent Deutsche Telekom in the form of senior reset notes, which it issued as part of the MetroPCS takeover.
Softbank has mandated eight banks to set up credit lines totalling Y4trn (US$39bn) and will initially obtain bridge loans, which will later be replaced with corporate bonds issued by Sprint and other long-term debt.
Japanese banks Mizuho, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui have been hired to raise the debt, alongside JP Morgan, Goldman Sachs, Deutsche Bank, BofA Merrill Lynch and Citigroup, according to previous reports.
Should the operators be allowed to merge it would create a scaled competitor to Verizon Communications and AT&T, which are far larger at present. However it would see the market shrink from four operators to three, and noises coming from the regulators have suggested this is not something they are comfortable with.
