SoftBank could give T-Mobile control to secure Sprint deal

MasayoshiSon
SoftBank CEO Masayoshi Son. Image: SoftBank

SoftBank is reportedly willing to give T-Mobile control of Sprint if necessary to achieve a merger between the two smallest major U.S. operators.

A Reuters report citing unnamed “people familiar with the matter” said SoftBank has yet to approach Deutsche Telekom, which owns T-Mobile, about the subject due to the FCC’s anti-collusion restrictions during the ongoing incentive auction of 600 MHz spectrum. The companies are expected to open discussions when those rules are no longer in effect, according to the report.

Walter Piecyk of BTIG Research recently predicted (reg. req.) the anti-collusion period will end April 19.

The Japanese behemoth SoftBank spent more than $20 billion to acquire Sprint in 2012, and the company had hoped to acquire T-Mobile as well, merging the carriers to take on Verizon and AT&T. That effort was dropped when U.S. regulators indicated they were opposed to a merger, however.

But shares of both T-Mobile and Sprint have risen in recent weeks on speculation that federal regulators will display a lighter regulatory touch under Trump than they did during the Obama administration. And it only increased after Trump announced in December that SoftBank will invest $50 billion in the U.S. in an effort to create 50,000 jobs.

The prospects of such a deal actually occurring are far from clear, however. Deutsche Telekom has indicated it has little interest in spinning off a thriving T-Mobile that has gained tremendous momentum in recent years. And though Sprint shares have risen significantly as the carrier won back market share, its finances are still shaky.

“As we’ve written repeatedly over the past year, if one strips away the distortions created by handset lease accounting, Sprint trades at an extraordinary premium to T-Mobile,” MoffettNathanson wrote in December. “Perhaps the market will never go through the effort to figure out just how large these distortions are, but T-Mobile and its parent Deutsche Telekom certainly will.”

And there's still no guarantee a deal will get the green light from regulators.

The U.S. wireless market has become much more competitive as smartphone penetration reaches saturation, however, and the sudden price war over unlimited-data plans likely indicate difficult times ahead for carriers. Both Verizon and AT&T are looking to expand their digital media businesses to offset slowing growth in wireless, but Sprint has yet to make any big moves beyond its core business. So SoftBank may be willing to make some major sacrifices in order to secure a deal.