Sprint (NYSE:S) CEO Dan Hesse and SoftBank CEO Masayoshi Son are scheduled to meet with FCC Chairman Tom Wheeler today, in which the topic of industry consolidation is likely to come up, according to a Wall Street Journal report. The report comes as there are growing indications that regulators would be opposed to a deal to merge Sprint and T-Mobile US (NYSE:TMUS), the No. 4 U.S. carrier.
According to the Journal, which cited an unnamed source, the meeting was not called to discuss any specific deal but Son is likely to argue that a merger between No. 3 Sprint and T-Mobile is needed to provide more competition to Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T).
However, regulators do not seem poised to give such a deal the green light. Last week William Baer, assistant attorney general for the antitrust division, said further consolidation among the top wireless carriers would face intense scrutiny. Wheeler himself has also said that he favors keeping four national wireless carriers.
A Sprint spokesman declined to comment.
According to the report, Son is undeterred by potential regulatory opposition, and thinks the deal can win out if its merits are fully heard. Proponents of the deal argue that a merger would create a strong third national carrier with scale on par with Verizon and AT&T.
SoftBank, which owns Sprint, is in talks with Deutsche Telekom, which owns T-Mobile, on a deal, according to multiple reports. However, there are many issues that still need be ironed out, including DT's stake in the company and who the senior management would be. Additionally, the regulatory opposition raises the importance of a breakup fee that would be paid if a deal was made but later fell through. Sprint can't afford to pay a sizable fee, which would likely total in the billions of dollars, an unnamed person familiar with the matter told the Journal.
Meanwhile, as Bloomberg notes, SoftBank's market value has fallen by $25 billion as Sprint has continued to struggle and as Son has been considering another U.S. acquisition. The company's stock has slid amid the regulatory opposition to a T-Mobile deal but analysts said Son would likely not give up on the deal easily, and could propose measures including spinning off business units to win over regulators.
"Son would consider a variety of ways to get regulators to say yes," Yasuaki Kogure, chief investment officer at Tokyo-based SBI Asset Management Co., told Bloomberg. "He won't give up soon."
- see this WSJ article (sub. req.)
- see this Bloomberg article
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