Softbank is in preliminary talks to buy Deutsche Telekom’s 74% stake in America’s number four wireless operator T-Mobile US, according to three sources familiar with the matter cited by Reuters. The news comes days ahead of a vote where Sprint…
Softbank is in preliminary talks to buy Deutsche Telekom’s 74% stake in America’s number four wireless operator T-Mobile US, according to three sources familiar with the matter cited by Reuters.
The news comes days ahead of a vote where Sprint Nextel shareholders will decide on whether or not they will accept Softbank’s US$20.1bn offer for the company.
Sprint’s shares dropped 1.36% on the back of the news while T-Mobile’s jumped more than 3%.
However, a bid for T-Mobile is reportedly plan B, and Softbank still wants to complete the Sprint deal which has the backing of the Sprint management.
Softbank was in talks last year to buy T-Mobile, according to the report. DT and Softbank are said to have remained in contact but talks have become more frequent following Dish Network’s rival proposal for Sprint in April.
T-Mobile USA and MetroPCS completed their merger to become T-Mobile US at the start of May, which is now floating on the NYSE. It gives DT a new way to exit the American market following the collapse of its sale of the operator to AT&T at the end of 2011.
Under the terms of the MetroPCS deal DT is forbidden from selling off shares over the next 18 months. The only exception to this rule is if it sells its entire 74% stake. Based on T-Mobile’s market cap of US$15.45bn, DT’s stake has a value of around US$11.4bn.
The Financial Times pointed out that Softbank would receive up to US$5n if the Sprint transaction collapsed. This amount includes a breakup fee, currency hedges, and a convertible bond in the context of the Sprint transaction.
DT declined to comment on the reports while Softbank did not reply to a request for comment prior to publication.
In the meantime Sprint investors are weighing up the Japanese telco’s offer alongside a counterbid from Dish Network. The DTH provider offered US$25.5bn to take over Sprint and the target’s special committee is reviewing the bid.
The Sprint shareholder vote on the Softbank offer is scheduled for Wednesday 12 June, but it could be postponed if Dish formalises its own offer prior to that date.
Softbank has repeatedly asserted that its proposal is superior to Dish’s and has indicated an unwillingness to raise its offer for Sprint. At the announcement of Softbank’s results in late April its CEO Masayoshi Son said: “Why would we increase our offer for Sprint, we are already providing a better deal than Dish.”
In spite of the drop following the report of Softbank’s T-Mobile interest, Sprint’s stock continued to trade above Softbank’s offer.
The vote has split the US’ three main proxy advisers. While Glass Lewis urged abstention, ISS was in favour of Softbank’s offer, and Egan-Jones said shareholders should reject the proposal from the Japanese telco.
The Ontario Teachers Pension Plan has reportedly backed Softbank’s offer, while fellow shareholders Paulson & Co and Omega Advisors were in favour of Dish’s offer.
