Sprint, T-Mobile said to agree to $32b merger

Dylan Bushell-Embling
05 Jun 2014
00:00

Softbank founder Masayoshi Son is reportedly a step closer to fulfilling his goal of buying a controlling stake in US operator T-Mobile and merging it with the Softbank-owned Sprint Nextel.

Sprint and T-Mobile have settled on the terms of a deal that would be worth $32 billion, sources told the New York Times' DealBook.

Under the proposed terms, Sprint would pay $40 per share in cash and stock for T-Mobile and merge with the company. T-Mobile's majority owner Deutsche Telekom would own a 20% stake n the merged company.

The combined entity would have around 100 million subscribers, allowing it to better compete against the virtual duopoly that is AT&T and Verizon.

According to the report, both Sprint and T-Mobile believe they need to merge in order to remain relevant in the US market, as AT&T and Verizon's power is only growing and the $45 billion Time Warner-Comcast merger will create a cable behemoth with a strong telecom presence.

Son has made public comments echoing this sentiment. Softbank paid $21.6 billion to acquire a 78% stake in Sprint Nextel in 2013, and has since hiked that stake past 80%.

But it remains to be seen whether US regulator FCC and the Justice Department will approve the proposed merger, considering the increasing consolidation taking place in the nation's telecom sector. Sprint, T-Mobile and Softbank may have a hard time convincing regulators that a merger is in the public interest.

The proposed terms of the deal includes a $3 billion break fee payable by Sprint to T-Mobile if regulators stand in the way or the deal otherwise falls apart.

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