Bloomberg News

Sprint Planning for Lengthy Review of T-Mobile Deal

July 15, 2014

Billionaire Masayoshi Son

Billionaire Masayoshi Son, chairman and chief executive officer of SoftBank Corp. Photographer: Yuriko Nakao/Bloomberg

As Masayoshi Son pushes for a takeover of T-Mobile US Inc. (TMUS:US), the Japanese billionaire is asking banks to commit financing for a longer-than-usual amount of time, underscoring the intense regulatory review he faces.

Lenders to Sprint Corp. (S:US) are asking for higher fees in exchange for financing the purchase of T-Mobile, because they expect the deal to face a lengthy approval process, people with knowledge of the matter said. Sprint, whose controlling shareholder is Son’s SoftBank Corp. (9984), is planning to acquire its rival for about $32 billion, people have said.

The companies, including T-Mobile shareholder Deutsche Telekom AG (DTE), expect the Federal Communications Commission and the Department of Justice to take at least a year to evaluate the deal, the people said, asking not to be identified discussing private information. The plan is to include a drop-dead date of 18 months after the deal’s announcement -- at which point it could be terminated, according to two of the people. That deadline could be extended, the people said.

Son, the founder of SoftBank, is pursuing the T-Mobile purchase even as regulators insist they want to preserve four competitors in the U.S. wireless marketplace, where Sprint and T-Mobile are No. 3 and No. 4. The U.S. Justice Department sued AT&T Inc. (T:US) in 2011 to block its effort to acquire T-Mobile.

Legal Challenge

SoftBank and Deutsche Telekom have already given consideration to challenging a regulatory rejection of the deal in court, three people said. When its bid for T-Mobile was challenged by the government in August 2011, AT&T initially said it would fight the litigation, only to back down later that year after deciding the costs of continuing were too high.

Son has argued that as technology converges, a new market for Internet services is emerging in which AT&T, Verizon Communications Inc. and Comcast Corp. are the three giants. He views a combined Sprint and T-Mobile as a counterweight, able to offer wireless high-speed Internet to compete with phone and cable modems.

A spokesman for Bonn-based Deutsche Telekom, which owns about 67 percent (TMUS:US) of T-Mobile, declined to comment, as did representatives at T-Mobile and Sprint.

Deutsche Telekom shares added 0.2 percent to 12.29 euros at 9:06 a.m. in Frankfurt. SoftBank closed 0.6 percent higher at 7,692 yen in Tokyo. T-Mobile slipped 1.4 percent in New York yesterday and Sprint lost 1.3 percent.

Spectrum Venture

Sprint is asking banks for about $20 billion, while SoftBank is seeking a similar amount, one of the people said, asking not to be identified discussing private information. The funds will also be used to refinance some of T-Mobile’s borrowings, to fund operations, and in an auction of wireless airwaves, the people said.

Sprint and T-Mobile plan to bid for that spectrum together through a joint venture that is independent of the takeover, the people said.

SoftBank is talking with large Japanese lenders as it seeks to keep fees down, one of the people said. Reuters earlier reported that SoftBank is lining up financing in addition to the amount Sprint is seeking.

While the companies have agreed to the broad outlines of a deal, an agreement isn’t likely to be announced until August, a month later than initially expected, the people said. Under the terms already discussed, Overland Park, Kansas-based Sprint will offer about $40 a share in stock and cash for T-Mobile, people with knowledge of the matter said in June.

Adviser Fees

Sprint and T-Mobile are also currently structuring the joint venture that will bid for a block of 600 megahertz airwaves to be auctioned by the U.S. government next year, the people said. The venture would be led by a separate management team and one of the two companies would have ultimate responsibility for the spectrum, one of the people said.

The companies have informally discussed the joint-bidding plan with FCC representatives and don’t expect opposition, one of the people said.

For the banks, including JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., and Deutsche Bank AG, higher fees would compensate them for tying up capital for such a lengthy period. Lenders typically offer bridge-financing for large transactions, with the funding intended to be replaced by longer-term debt such as a bond or loan.

Spokesmen for Goldman Sachs and JPMorgan and Deutsche Bank declined to comment, while a representative for Bank of America didn’t immediately return a calls seeking comment.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net; Mohammed Hadi at mhadi1@bloomberg.net Mohammed Hadi


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Companies Mentioned

  • TMUS
    (T-Mobile US Inc)
    • $26.45 USD
    • 0.54
    • 2.04%
  • S
    (Sprint Corp)
    • $4.16 USD
    • 0.08
    • 1.92%
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