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NIKKEI 225 (N225)

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Softbank Nearing Deal for Sprint, T-Mobile Merger

07/11/2014 | 02:09pm US/Eastern

TOKYO -- SoftBank Corp. (>> Softbank Corp) has reached a basic agreement to acquire T-Mobile US Inc. (>> T-Mobile Us Inc) from German parent Deutsche Telecom AG (>> Deutsche Telekom AG), paving the way for a merger between the fourth-ranked U.S. mobile carrier and rival Sprint, The Nikkei reported in its Saturday morning editions.

The two sides are still ironing out the details, and the deal needs clearance from U.S. regulators. Together, third-ranked Sprint Corp. (S), acquired by SoftBank last year, and T-Mobile have some 100 million U.S. subscribers, putting their combined customer base on par with those of Verizon Wireless and AT&T.

The Japanese carrier plans to buy more than 50% of T-Mobile shares through Sprint from Deutsche Telekom, which owns a roughly 67% interest. SoftBank will pay cash and use stock swaps to cover the estimated purchase cost of more than Y1.7 trillion.

Eight financial institutions will bankroll the deal by setting credit lines of about Y4 trillion. In addition to Japan's three megabanks, such foreign financial institutions as J.P. Morgan Chase & Co. (>> JPMorgan Chase & Co.) and Deutsche Bank (>> Deutsche Bank AG (USA)) will take part. To keep interest rates low, the SoftBank group is expected to first procure the funds through bridge loans, which will then be replaced with Sprint-issued corporate bonds and other long-term borrowing.

SoftBank had more than Y9 trillion in interest-bearing debt as of March 31. But the banks apparently have confidence in the telecommunication company's ability to repay loans, given its solid domestic wireless business.

The U.S. Federal Communications Commission and the Department of Justice need to approve the deal, a process expected to take a year or two. Deutsche Telekom is concerned that T-Mobile's competitiveness will suffer if capital investment is put off during the screening period and the deal is not approved. It is asking SoftBank to compensate for the loss if this happens. The two sides apparently have not finalized several other conditions as well.

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