Any number of factors may disconnect their ongoing conversation but for now it appears that that Sprint will be acquiring T-Mobile this summer in a deal that will create an entity that will compete with Verizon and AT&T in the increasingly megalithic landscape of telecom.
In an agreement that could be announced as early as next month, “Sprint will offer about 50% stock and 50% cash for T-Mobile, leaving Bonn-based parent Deutsche Telekom AG with about a 15% stake in the combined company,” sources tell Bloomberg’s Alex Sherman. “At just under $40 a share, T-Mobile’s equity value would be about $31 billion.”
“Billionaire Masayoshi Son, the founder of Japan-based SoftBank Corp., which owns 80% of Sprint, has been pitching the deal to skeptical regulators as beneficial to consumers in both wireless and Internet service,” Sherman points out, but neither Son nor spokespeople for the other principals would comment on the leaks yesterday, which were also broken by the Wall Street Journal.
“The companies are still working toward a formal contract, and the effort could fall through,” reports the WSJ’s Ryan Knutson, pointing out that “a deal would need the approval of the Federal Communications Commission and the Justice Department.” If it does go through, the merger would combine the No. 3 and No. 4 players in the industry.
“Both companies feel doing a deal now is critical for their long-term survival, people familiar with the matter have said,” Knutson writes. “AT&T and Verizon control most of the industry's valuable wireless customers and profits. And while T-Mobile has had a good competitive run in the past year, reversing subscriber losses and taking customers from rivals, executives at both companies have said the best way to create meaningful competition over the long term would be to join forces.”
Softbank’s Son, who is Sprint’s chairman, “is making a credible case that they not only need scale to compete more effectively in the wireless industry but could also offer new and needed competition for wired broadband,” BTIG Research analyst Walter Piecyk tells the New York Times’ David Gelles and Michael J. de la Merced.
But he’ll have to convince regulators, who “have many deals in front of them and need to consider where the market will be five years from now and how to best stimulate competition, which not only means lower prices but also more investment,” according to Piecyk. The proposed deals currently being weighed by the Justice Department include Comcast’s offer for Time Warner Cable and AT&T’s bid for DirecTV.
Among the items on the “to do” lists for Sprint and T-Mobile: “The two sides have not conducted due diligence on one another, drafted a definitive agreement or arranged financing,” Gelles and de la Merced report.
“U.S. regulators rejected AT&T's $39 billion takeover bid for T-Mobile US in 2011,” point out Reuters’ Diane Bartz and Marina Lopes. “The agencies have tipped their hand and the parties know that,” an antitrust expert who spoke anonymously to protect business relationships told them. But the two parties “must think that they have stronger arguments and they're willing to battle them out with the agencies,” the source continued. “That has to be part of their calculus here.”
Last week, Softbank’s Son “pledged to abide by net neutrality principles if his company is allowed to buy” T-Mobile, Knutson and Douglas MacMillan reported in the Wall Street Journal’s “MarketWatch”blog, “offering regulators a carrot as he builds his case for the controversial deal.”
Meanwhile, Son yesterday introduced what he called “the world's first personal robot with emotions" at a press conference in Tokyo, reports Sam Byford in The Verge. “The robot is said to learn from human interaction and behavior, uploading its experiences to a cloud AI system for other units to use.”
Possible uses for the humanoid named “Pepper” — available for less than $2,000 at retail early next year and developed by SoftBank’s partner Aldebaran, a French robotics company — include babysitting, clerking, and watching seniors, according to various reports.
“Pepper could become a very good friend and a powerful tutor for a child, for example. He could learn about a family over several years... and actually become a member of the family,” Son said, according to Agence France-Presse.
One has to wonder how well Pepper would do charming federal regulators.