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SPRINT CORP (S)
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Sprint to Halt Talks On T-Mobile Merger -- WSJ

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10/31/2017 | 07:48am CET
By Ryan Knutson,, Drew FitzGerald and Dana Mattioli 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 31, 2017).

For the second time in three years, Sprint Corp. is preparing to leave T-Mobile US Inc. at the altar after months of negotiations to bring together the two U.S. wireless providers.

The two sides have been exploring a deal that would combine the No. 3 and No. 4 U.S. carriers by subscribers, seeking to create a player big enough to challenge the market leaders in a rapidly changing telecommunications and media landscape.

But directors at Sprint's parent company, SoftBank Group Corp., met in Tokyo last week and decided to suspend the merger efforts, according to people familiar with the matter. Officials at T-Mobile were caught off guard by the development, said others familiar with the matter.

SoftBank's founder and chairman, Masayoshi Son, is concerned about giving up too much control in the potential transaction, said the people familiar with the break-down in the talks.

The two sides also have been unable to agree on a valuation for Sprint's shares, they added, though the talks still could be revived at a later date.

SoftBank, which owns more than 80% of Sprint, had been in negotiations with T-Mobile's parent Deutsche Telekom AG on an all-stock deal that would give the German firm control over the combined U.S. company, said the people familiar with the suspension of the talks.

Sprint shares tumbled Monday after the Nikkei newspaper in Japan reported that SoftBank planned to break off negotiations with Deutsche Telekom. Sprint shares fell 9% to $6.34, while T-Mobile dropped 5.4% to $59.58 in Monday afternoon trading.

Shares of Verizon Communications Inc. and AT&T Inc., the two biggest U.S. carriers, slipped Monday, as investors were hopeful the merger would have reduced competitive pressures.

Sprint, which has a market value of about $25 billion and more than $30 billion in net debt, has been losing money for years and has had to leverage some of its network assets to obtain cheaper loans. T-Mobile's market value is about $50 billion.

One complicating factor in the talks is that Sprint shares have slumped in recent weeks, potentially hampering what Sprint shareholders could expect to receive in the deal, as the transaction was expected to give Sprint shareholders little or no premium beyond roughly their current value.

Instead of a merger, Sprint plans to invest in its network, said one of the people familiar with the break-down in the talks who is close to Sprint.

The latest discussions have been rocky. Back in May Mr. Son opened a second line of discussions with U.S. cable companies after the talks with Deutsche Telekom faltered over issues including price, The Wall Street Journal has reported.

A decision to walk away from the T-Mobile deal would echo the last time the two companies explored a merger, in 2014. Sprint was poised to acquire T-Mobile but scrapped the plan after realizing regulators were sure to oppose it.

In the current discussions, T-Mobile Chief Executive John Legere was expected to run the merged company, and Deutsche Telekom wanted to maintain effective control of the carrier so it could include its U.S. earnings in quarterly reports, The Wall Street Journal has reported.

In this case, the SoftBank board thought giving up so much influence was unwise, given Mr. Son's belief that artificially intelligent robots and other devices are a major business opportunity and connectivity of those devices will be critical, said people familiar with the merger talks who know about the thinking of the SoftBank board.

Sprint CEO Marcelo Claure is also on SoftBank's board.

While Mr. Son had agreed to give up control in principle, he had been looking for ways to maintain some sort of additional influence now or in the future, said the people familiar with the SoftBank board's thinking.

Since the companies broke off merger talks in 2014, T-Mobile has added millions of new subscribers and passed Sprint to become the third largest carrier. While Sprint was able to reverse years of customer losses, it has struggled to turn a profit.

Without a merger, Sprint will need to ratchet up spending on its network because, analysts say, they have spent far less than their rivals. In recent months, some Sprint managers have considered scaling back major internal investments because T-Mobile was expected to run the combined company, according to Sprint employees.

If a deal had been reached, its antitrust approval in Washington was far from assured. Republican regulators under the Trump administration are thought to be more open to consolidation that those in the Obama years, but horizontal mergers that eliminate a competitor, especially in already concentrated markets, typically face significant scrutiny.

"Sprint needs this merger so much more than T-Mobile does," Recon Analytics Inc. researcher Roger Entner said, adding that if they come back to it later, "T-Mobile and Deutsche Telekom will in all likelihood be in a stronger position."

Write to Drew FitzGerald at [email protected] and Dana Mattioli at [email protected]

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Financials ($)
Sales 2018 32 618 M
EBIT 2018 2 638 M
Net income 2018 -156 M
Debt 2018 33 731 M
Yield 2018 -
P/E ratio 2018 -
P/E ratio 2019 1 683,78
EV / Sales 2018 1,80x
EV / Sales 2019 1,76x
Capitalization 24 922 M
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Number of Analysts 30
Average target price 6,48 $
Spread / Average Target 4,1%
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Managers
NameTitle
Raul Marcelo Claure President, Chief Executive Officer & Director
Masayoshi Son Chairman
Néstor Cano Chief Operating Officer
Tarek A. Robbiati Chief Financial Officer
John C. B. Saw Chief Technology Officer
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