SoftBank-owned Sprint (NYSE: S) is going to move ahead with a deal for No. 4 carrier T-Mobile US (NYSE:TMUS) after Sprint executives met with banks last month to secure debt arrangements for the transaction, according to a Bloomberg report.
The report, citing unnamed sources, said that Sprint CFO Joe Euteneuer and Treasurer Greg Block met with six banks to get financing in place for when Sprint decides to make a move. Sprint is expected to make a formal bid in June or July, the report added. T-Mobile has a market value of $23.5 billion.
Representatives from Sprint and T-Mobile declined to comment, according to the report.
During T-Mobile's first-quarter earnings conference call, held shortly after the release of the Bloomberg report, T-Mobile CEO John Legere reiterated that he is open to industry consolidation. "It's a matter of when, not if" such consolidation takes place, he said.
Legere said there are "multiple ways to play aggressively" and that T-Mobile has said consistently said that "one alternative" is to create a larger player with more scale. "Our scale, our growth, our momentum could benefit from a significant scaling of fixed assets," he said.
According to the Bloomberg report, SoftBank CEO Masayoshi Son is working to build an argument that could convince the FCC that a deal with T-Mobile is in the best long-term interests of the wireless industry. In March, Son explicitly called for a deal between Sprint and T-Mobile, and has said combining the No. 3 and 4 wireless carriers would spark a "massive price war" and more competition in the U.S. market. However, regulators at the FCC and Department of Justice have been decidedly cool on the proposed transaction.
The Bloomberg report also said talks with banks have been focused on how much Sprint should borrow for the deal, since Sprint would also be taking on the $8.7 billion in net debt that T-Mobile has on its balance sheet.
Moreover, SoftBank and T-Mobile parent Deutsche Telekom, which still controls around 67 percent of T-Mobile, are still debating who would run the combined company, with Legere seen as the leading candidate, the report said.
AT&T tried to buy T-Mobile in 2011, but regulatory opposition eventually squashed that transaction. T-Mobile has since merged with MetroPCS, acquired spectrum from Verizon, Sprint and U.S. Cellular (NYSE:USM), and has been growing steadily the past four quarters. In the first quarter of 2014, T-Mobile added 2.4 million total customers, including 1.3 million branded postpaid customers, the most of any U.S. carrier.
Although officials at the Department of Justice have been highly skeptical of further industry consolidation, analysts have argued the bigger roadblock is with the FCC since the DOJ must sue to block a deal on antitrust grounds while the FCC can block a deal if it finds it is not in the public interest.
- see this Bloomberg article
- see this Re/code article
- see this BTIG blog post (reg. req.)
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