Sprint Corp. (S) plans to push forward with a bid for T-Mobile US Inc. (TMUS) after meeting with banks last month to make debt arrangements for that offer, people with knowledge of the situation said.
Sprint Chief Financial Officer Joe Euteneuer and Treasurer Greg Block met with six banks to ensure the lenders would be ready with financing structures when Sprint decides to pursue a takeover, said three of the people, asking not to named because the discussions are private. T-Mobile ended trading yesterday with a market value of about $23.5 billion.
Masayoshi Son, chief executive officer of SoftBank Corp. (9984), which owns about 80 percent of Sprint, is expected to make a formal bid in June or July, one of the people said. While regulators have expressed concerns about a combination of the third- and fourth-largest wireless carriers in the U.S., Son and his advisers are hoping to convince the Federal Communications Commission and the Department of Justice about the long-term health of the industry.
“Son doesn’t give up,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Holdings Inc. in Tokyo. “An acquisition of T-Mobile would increase Sprint’s ability to compete in the U.S. by expanding scale and reducing costs.”
T-Mobile said today that it added 1.3 million new monthly subscribers in the first quarter, more than AT&T Inc. and Verizon Communications Inc. combined. Sprint had a net loss of monthly subscribers in the quarter.
The talks with banks centered around how much Sprint should borrow for the deal, a move that would have it also take on the $8.7 billion in net debt that T-Mobile has amassed, the people said. No financing commitments have been signed, and Son is still debating how to pay for a deal, the people said.
SoftBank and Deutsche Telekom AG (DTE), which owns about 67 percent of T-Mobile, are still speaking with each other to determine who would run the company, the people said. T-Mobile CEO John Legere is the leading candidate, one of the people said. Deutsche Telekom wants as much cash as possible in the deal, another person said.
Representatives for Overland Park, Kansas-based Sprint and Bellevue, Washington-based T-Mobile declined to comment. A spokesman for Deutsche Telekom didn’t respond to an e-mail seeking comment sent outside regular business hours.
Sprint wants to pursue a deal while the Justice Department and FCC are also reviewing Comcast Corp.’s acquisition of Time Warner Cable Inc., with the hope that regulators will see both deals as changing the telecommunications industry, three of the people said. The regulators blocked AT&T Inc.’s effort to acquire T-Mobile in 2011.
“Were there ever a moment to make a big long-term argument about the changing nature of the U.S. telecom landscape, it is now,” Sanford C. Bernstein & Co. analyst Robin Bienenstock wrote in a note today.
Son’s team believes AT&T was unprepared when it attempted to convince regulators a deal was in the public’s interest in 2011, three of the people said. Sprint is working to ensure it will have a detailed case to put in front of regulators, the people said.
Sprint also wants to avoid agreeing to a high termination fee because it could provide regulators with an incentive to reject the deal, one of the people said. AT&T had to pay T-Mobile $6 billion in cash and spectrum after its attempt was blocked, a move that Son views as a strategic mistake because T-Mobile became a stronger competitor as a result, the person said.
The Sprint executives met with bankers at Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co. (JPM), Mizuho Financial Group Inc., Bank of America Corp. and Deutsche Bank AG, according to the people familiar with the situation.
Representatives for the banks declined to comment.
Any deal would need to be approved by the boards of SoftBank, Deutsche Telekom, Sprint and T-Mobile. This could be a lengthy process and may slow down the timeline on when a deal is announced, the people said.
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