Report: DT would keep a stake in T-Mobile in a merger with Sprint

Sprint (NYSE: S) parent SoftBank and T-Mobile US (NYSE:TMUS) owner Deutsche Telekom are inching closer to a deal, with DT reportedly willing to keep a minority stake in T-Mobile in a deal to sell T-Mobile to SoftBank, according to a Reuters report.

The report comes shortly after SoftBank CEO Masayoshi Son again indicated that Sprint would benefit from greater scale and could generate more competition for AT&T (NYSE: T) and Verizon Wireless (NYSE: VZ) that way.

According to the report, which cited unnamed sources, much still needs to be worked out in the deal, including the price and financing. DT could keep a stake of around 15 percent in T-Mobile as part of a deal, which would cut down on the amount that SoftBank would need to pay while giving DT the benefit of synergies, the report said.

The Japanese news agency Kyodo also earlier reported that DT accepted SoftBank's offer to buy T-Mobile. Son reportedly put forward the deal in a meeting with top executives of T-Mobile and Deutsche Telekom in mid-May and got a positive response.

Meanwhile, the Reuters report indicated that while the two sides want to move ahead with the transaction, the deal would likely face strong skepticism from regulators at the FCC and Department of Justice. Notably, the report said no decision on whether to formally move forward with a deal is imminent.

Representatives for Deutsche Telekom and Sprint declined to comment, according to Reuters.

Son said earlier this week at the Re/code Code Conference that he "strongly" admires T-Mobile and the "price disruption" the carrier has brought to the U.S. market. He also said he highly admires T-Mobile CEO John Legere; there has been market speculation that Legere would lead a combined Sprint/T-Mobile.

DT CEO Timotheus Hoettges said earlier this month that while he is open to creating a "super maverick" to challenge AT&T and Verizon, there are clear hurdles and regulators are wary.

A key issue is next year's incentive auction of 600 MHz broadcast TV spectrum. The FCC's rules for bidding on the airwaves are geared to ensure that Sprint, T-Mobile and smaller carriers acquire spectrum in the auction. However, the rules would need to be changed if a Sprint/T-Mobile deal were proposed.

For more:
- see this Reuters article
- see this Kansas City Star article

Related Articles:
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Dish's Ergen leaves door open for T-Mobile deal if a Sprint/T-Mobile effort fails
DT open to creating 'super maverick' with T-Mobile US, but is wary of regulatory hurdles
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