SoftBank Group may propose to T-Mobile US that the American mobile carrier enter merger talks with SoftBank’s U.S. subsidiary Sprint, sources said Thursday.
This comes after an earlier bid to buy T-Mobile US and merge it with Sprint — a move SoftBank abandoned in 2014 thwarted by difficulties in getting approval from U.S. regulators who had been concerned about the consolidation of mobile carriers.
T-Mobile US ranks third in the U.S. market by subscription contracts. A merger with Sprint, the fourth-largest, would create a mobile group rivaling Verizon Communications and AT&T — respectively the No. 1 and No. 2 carriers in the country.
SoftBank acquired Sprint in 2013 and is eager to improve the profitability of its U.S. mobile business through the envisaged integration, possibly under a stock-swap agreement, the sources said.
Chief Executive Officer Masayoshi Son said Wednesday his company will “actively consider every possibility” with regard to restructuring the U.S. telecom industry, adding he is keen to talk about a deal for Sprint’s merger.
“What we have in our mind is T-Mobile US. We are prepared to enter talks with an open mind,” he said.
Son told Donald Trump last December that he plans to invest $50 billion in the United States and create 50,000 new jobs. According to Son, the U.S. president did not talk about a merger between T-Mobile US and Sprint, but “Mr. Trump did say that he will advocate deregulation.”
On Thursday, T-Mobile US parent Deutsche Telekom Chief Executive Tim Hoettges said merger talks will very likely get under way.
T-Mobile US is a cash cow for the German telecom service operator, which owns 64 percent of the U.S. carrier. It was a key driver of Deutsche Telekom’s 7.5 percent growth in core profit on year in the January-March quarter.
A separate plan to merge SoftBank-backed satellite startup OneWeb with Luxembourg-based satellite firm Intelsat is close to being scrapped, according to people familiar with the matter.
Intelsat extended a deadline for bondholders to approve the deal until May 15 without reaching an agreement, the company said Thursday. The situation is fluid and a deal could still be salvaged, but SoftBank appears to have cold feet, said one of the people, asking not to be identified because the matter is private.
SoftBank has been approached by multiple parties offering an alternative to Intelsat’s capabilities, though it will not pursue negotiations until the current talks are concluded, said the person.
OneWeb, the U.S. satellite startup backed by SoftBank, said in February that it planned to combine with Intelsat, an older, larger satellite provider. But the deal is contingent on Intelsat persuading its bondholders to accept a buyout that would give them an average of 74 cents on the dollar and ease Intelsat’s struggle with its $15 billion debt load.
Creditors have resisted those terms and have asked SoftBank to inject more cash for the debt exchange. As an earlier offer expired at midnight May 10 New York time, a group that owns Intelsat’s Jackson bonds showed willingness to compromise, while Luxembourg bondholders insisted on 95 cents, the person said.
A spokeswoman for Intelsat declined to comment before the deadline.
Intelsat’s bonds have traded well below that level. Intelsat Luxembourg’s 7.75 percent notes due 2021 traded at 53.5 cents, while its 8.125 percent Luxembourg notes due 2023 fetched 53 cents on Wednesday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. Threatening to walk away from the deal works to SoftBank’s advantage because it could push down bond prices and force bondholders to compromise.
Intelsat creditors made a counter-proposal after the offer was announced in February asking to be paid out at or close to par, Bloomberg previously reported. Luxembourg bondholders are being advised by Centerview Partners and law firm White & Case, while Jackson bondholders are working with Houlihan Lokey and law firm Kirkland & Ellis.
Some of Intelsat’s bonds traded at prices well above what the company initially proposed after the deal was announced, indicating that the terms might need to be sweetened to get the required 85 percent of the notes signed up for the deal. SoftBank had said it would invest $1.7 billion in cash and hold a 39.9 percent voting stake in the combined company, according to a statement in February.
The impasse was reflected in the tally of bonds committed to the debt exchange so far. Only about $31 million of notes were signed up as of Thursday, with each of the seven individual issues attracting less than 1 percent of their total outstanding, according to the company statement.
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