Deals

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Sprint Corp. and T-Mobile US Inc. have every reason to merge. But get inside the mind of Masayoshi Son: He's said that he has a 300-year plan, which makes his stance in deal negotiations very different than the one others might have if they owned a business like Sprint with the same potentially bleak prospects for the coming years. 

As the wireless carriers iron out the final terms of a transaction, Sprint's valuation is languishing at its largest discount to T-Mobile's:

Upper Hand
T-Mobile's ratio of enterprise value to future 12-month Ebitda has held near its largest premium relative to Sprint's as the two finalize merger terms:
Source: Bloomberg

Outsiders and even Sprint minority shareholders are looking at this trajectory and saying, take the money and run (or in this case, T-Mobile shares since it will be an all-stock deal). Even I have. But Son is a visionary entrepreneur at heart with a far more grandiose idea of Sprint's long-term future than the chart above implies. 

Sprint has burned through billions of dollars of free cash flow in the past few years and ceded market share to its soon-to-be merger partner. It was just last quarter that Sprint finally posted a profit for the first time in three years, but it also resorted to a sad offer of free service to Verizon Communications Inc. defectors. 

Stem the Bleeding
Sprint's finances are improving some, but it still has to counteract the perception that it's the worst of the major wireless carriers before it can make a real recovery
Source: Bloomberg

By all measures, Son's investment in Sprint beginning in 2013 (via his SoftBank Group Corp. telecom giant in Japan) hasn't gone well. Bloomberg News reports that Son is even willing to accept a merger valuation around Sprint's current market price -- but he wants a significant say in the future of the new company, even though it will be controlled by T-Mobile's parent, Deutsche Telekom AG, and not SoftBank. 

Could it be that we're all just not dreaming big enough for Sprint? It's certainly hard to argue with its poor operational results and sickly financial position. 

But with T-Mobile, the future could look very different, more akin to what Son sees. There's a reason he's sticking around, and for all his intricacies, there are many who say they wouldn't bet against him. He's willing to invest lots of money in the businesses he believes in. And with John Legere steering the ship, this combination of a rich visionary and a skilled operator could be very good for both Sprint and T-Mobile. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net