T-Mobile, Sprint Shares Spike On Potential SoftBank Acquisition

According to Nikkei Asian Review, SoftBank is nearing a deal to acquire T-Mobile US TMUS from Deutsche Telecom.

Details Surrounding The Rumor

The report noted, "The two sides are still ironing out the details, and the deal needs clearance from U.S. regulators. Together, third-ranked Sprint, acquired by SoftBank last year, and T-Mobile have some 100 million U.S. subscribers, putting their combined customer base on par with those of Verizon Wireless and AT&T."

By purchasing more than half of T-Mobile shares through Sprint S in cash and stock swaps, SoftBank eagerly looks to financial institutions for backing. Deutsche Bank and JP Morgan are two out of eight banks willing to assist in the deal, despite SoftBank's more than 9 trillion yen in interest-bearing debt.

Risk Continues To Weigh Heavily

Earlier this week, Morgan Stanley noted opportunities and challenges surrounding a potential merger between T-Mobile and Sprint.

Although Sprint's large debt and free-cash-flow burn may not be what SoftBank investors are looking for, the possibility to compete with Verizon and AT&T is very compelling.

This process will likely last between one and two years pending on the approval of the Department of Justice and U.S. Federal Communications Commission. Nikkei concluded, "Deutsche Telekom is concerned that T-Mobile's competitiveness will suffer if capital investment is put off during the screening period and the deal is not approved. It is asking SoftBank to compensate for the loss if this happens. The two sides apparently have not finalized several other conditions as well."

Stock Action

Shares of Sprint closed at $8.25 on Thursday. The stock spiked 4.36 percent to $8.61 following Nikkei's report.

T-Mobile closed at $32.88. Shares spiked to $33.88 on the rumor.

Posted In: Analyst ColorNewsRumorsAsset SalesManagementM&AMorgan StanleyNikkei Asian ReviewSoftbank
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