Sprint Readying Banks for a Summertime Bid for T-Mobile, Says Report

Sprint, after a pause to reconsider its tactics, is said to be putting the necessary pieces in place to try to buy T-Mobile.

Sprint earlier this year took a break from considering an acquisition of rival T-Mobile, amidst negative public reaction to the deal. The response surprised Sprint CEO Dan Hesse and Chairman Masayoshi Son, a source told the Wall Street Journal in February, adding that they had decided to let the feedback "sink in" and take some time to ponder a new strategy.

That time is over.

Sprint CFO Joe Euteneuer and Treasurer Greg Block recently met with six banks, telling them to get financing structures in place, according to a May 1 report from Bloomberg.

"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," said the report.

It added that Son, also the CEO of Softbank, which now owns a 78 percent share of Sprint, could make an official bid for T-Mobile in June or July.

Softbank's Son on a Mission

Son has repeatedly said that teaming with T-Mobile would give Sprint the scale necessary to compete with AT&T and Verizon Wireless. A combined Sprint-T-Mobile would make for an industry with "three heavyweights," Son told interviewer Charlie Rose in March.

"If I could have a real fight, not a pseudo fight, I'd go into a massive price war," Son told Rose. "I want to be No. 1. If we were No. 3 and we had enough chance, I would go [into a] price competition, very much aggressively, and [focus on] network competition to create the world's best network."

Within days of that interview, Son also gave a speech before the U.S. Chamber of Commerce in Washington, D.C., during which he discussed his desire to bring high-speed, affordable Internet service to more Americans, the reasons why Americans use less mobile data than consumers in other countries but pay more for it, and why he personally is the man to help turn things around.

"It requires a lot of scale and money and so on, but I'd like to give it a shot," he said. "I'd like to provide an alternative to the monopolistic or oligopolistic situation that two-thirds of the American households can get access to only one or two providers. I'd like to be a third alternative ... and change the U.S. situation as I did in Japan."

In addition to changing the opinions of consumers, Sprint and Son will need to bring federal regulators around to the idea. In 2011, after a 10-month effort by AT&T to get the Federal Communications Commission (FCC) to agree to let it merge with T-Mobile, the U.S. Department of Justice finally filed an antitrust lawsuit against AT&T to get it to back away from the deal.

Current FCC Chairman Tom Wheeler has said he is skeptical that a Sprint merger with T-Mobile could keep the current amount of competition in the wireless industry intact, but that he will keep an open mind to arguments to the contrary.

In recent days, all four major carriers have listed the results of their fiscal 2014 first quarters. AT&T posted revenue growth and its best first-quarter postpaid additions in five years; Verizon posted double-digit income growth, but found it harder to add new customers; Sprint, undergoing a major network overhaul, posted a loss—though a far smaller loss than in recent quarters; while T-Mobile, using "Un-carrier" tactics that it claims have encouraged real competition in the industry, brought in not only record numbers of new customers, but more new customers than all three other carriers did during the quarter combined.

During T-Mobile's May 1 earnings call—also the one-year anniversary of T-Mobile's acquisition of MetroPCS—CEO John Legere repeated that he thinks consolidation is necessary for the industry.

"And that's not among the top four," he added. "It's also the other players on the periphery who are looking in and want to play."

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