Sprint, T-Mobile Merger Talks Continue as Softbank Pushes for Deal

NEWS ANALYSIS: Softbank and Deutsche Telekom are continuing to negotiate a deal to sell T-Mobile to Sprint, but it's not clear how they will craft a deal that will win regulatory approval.

Talks between two non-U.S. carriers are well along in paving the way for a merger of two U.S. wireless companies. The two companies, Softbank of Japan and Deutsche Telekom of Germany, have apparently agreed that Softbank will buy a majority of shares in T-Mobile U.S. via its Sprint subsidiary.

According to unsourced stories released by the Nasdaq and Nikkei markets over the weekend, both companies have reached a basic agreement and Softbank has lined up the required financing through a consortium of Japanese and U.S. banks to come up with the $39 billion it will take to cover the full cost of the deal.

The shares being bought from DT will cost Softbank an estimated $32 billion. There are still details to be worked out, including a $2 billion break-up fee demanded by T-Mobile U.S. That break-up fee would be paid to T-Mobile if the merger fails.

You may remember that T-Mobile benefitted hugely from the nearly $4 billion break-up fee paid by AT&T when its merger ran afoul of regulators three years ago. This effort to merge Sprint and T-Mobile gathered steam following a renewed PR effort by Softbank in June. However, Softbank actually started its efforts to add T-Mobile to its telecom stable in 2013, shortly after Softbank completed its purchase of Sprint.

What's going on here is that Softbank CEO Masayoshi Son wants a bigger chunk of the U.S. wireless market than he can get by just owning Sprint, especially with Sprint's fortunes in decline as its Long Term Evolution (LTE) rollout fumbles.

There's little doubt that Son has looked on the activities of T-Mobile CEO John Legere with admiration as he's taken on his much larger competitors and continues to win. It seems clear that what Son wants is Legere running a much larger T-Mobile that he owns.

And that's exactly what the plan seems to be. While neither Softbank nor Legere have confirmed that there's a plan in place to put him in charge of Sprint, he's also made it clear in comments as recently as the T-Mobile's "Un-Carrier" announcements in June that he thinks the approach could work with other mobile carriers besides T-Mobile. The current plan, according to a variety of press and analyst reports, seems to be that T-Mobile would be the surviving corporation if the merger clears all the hurdles.

The resulting picture is that of Sprint going away, with the new company being called T-Mobile U.S. John Legere would be the CEO of the combined company. The marketing program, the whole Un-Carrier thing, would continue as it is now, but more so. But a number of questions remain.

The most pressing question, especially for customers, is how to integrate the disparate wireless technology that the two companies use.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...