Coverage: T-Mobile is looking to acquire Sprint

U.S. wireless carrier T-Mobile US Inc. is exploring taking over rival Sprint Corp. in an all-stock deal, after SoftBank Group Corp. offered to give up its majority ownership of Sprint.

Liana B. Baker of Reuters had the news:

The latest negotiations come after Reuters reported earlier this year that Japan’s SoftBank was prepared to give up control of Sprint to clinch a merger with T-Mobile, and only retain a minority stake in the combined company.

Sprint and T-Mobile, which is controlled by Germany’s Deutsche Telekom AG, are still weeks away from an agreement, and have not settled on a share exchange ratio or even started performing due diligence on each other, the source added.

The companies have agreed, however, that John Legere, T-Mobile’s outspoken chief executive, would run the combined company should there be a deal, according to the source, who asked not to be identified discussing confidential negotiations.

Both Sprint and T-Mobile did not immediately respond to requests for comment.

Alex Sherman, Scott Moritz and Stefan Nicola of Bloomberg News reported that the deal was turned down by regulators in 2014:

The idea of a combination between the No. 3 and No. 4 carriers was shot down by regulators in 2014, but with a new administration, preliminary discussions picked up earlier this year. Washington, D.C., regulators appointed by President Donald Trump haven’t signaled an insistence on maintaining a four-player nationwide wireless market that was a feature of the preceding administration.

“Such a deal would take at least a year to get approval and there is much logic on announcing a transaction before the November 2018 election cycle,” Jennifer Fritzsche, a Wells Fargo analyst, said in a note.

T-Mobile shares climbed 5.9 percent to $65.42 at Tuesday’s close, while Sprint surged 6.8 percent to $8.20. CNBC reported Tuesday details of the Sprint and T-Mobile talks.

Sprint has posted losses for a decade, even after SoftBank bought control in 2013 and returned the company to subscriber growth. As of June 30, the mobile operator had more than $12 billion in debt coming due in the next three fiscal years, putting pressure on SoftBank, led by billionaire Masayoshi Son, to find a partner.

David Faber of CNBC reported that a deal is still weeks away from being finalized:

Both companies and their parents, Deutsche Telekom and Softbank, have been in frequent conversations about a stock-for-stock merger in which T-Mobile parent Deutsche Telekom would emerge as the majority owner.

People close to the situation stress that negotiators are still weeks away from finalizing a deal and believe the chances of reaching an agreement are not assured. The two sides have not yet set an exchange ratio for a deal, but are currently engaged in talks to hammer out a term sheet.

The companies declined to comment on the report.

T-Mobile and Sprint have had a seemingly endless dalliance over the years since Softbank took control of Sprint, pushed by the prospect of billions of dollars in cost synergies that a merger would bring. The last time the two companies held meaningful talks earlier this year, Softbank’s Masayoshi Son indicated a willingness to sell Sprint to T-Mobile.