Sprint Has Proposals From Banks on Financing Bid for T-Mobile
By Ryan Knutson and Dana Mattioli
Sprint Corp. has received proposals from at least two banks on how to finance a takeover of smaller rival T-Mobile US Inc., giving Sprint confidence that a deal could be funded, people with the matter said.
Terms of any bid have yet to be firmed up, one of the people said. But the proposals envision a total "enterprise value" of about $50 billion for the deal, which would involve paying around $31 billion for T-Mobile and backstopping a possible refinancing of roughly $20 billion in existing T-Mobile debt, the people said.
As much of a positive development this could be for NQ, should it pass, I hope it's not going to happen just for the sake of net neutrality and consumer experience in the US. Telco's are a horrid bunch of cold profiteers and T-mobile looks like it wants to shake them up good. They want to take it out before it can do more damage to their feudal monopoly trifecta. I'd rather have 4 carriers engaged in a healthy market competition than 3 cartel fat cats and + $1-2 per share on my NQ investment.
T-Mobile currently has a market value of about $26 billion, its shares having risen on reports of the possible tie-up. Having funds at the ready for a backstop on T-Mobile's existing debt would be necessary, because debt holders could cash in their bonds if the company changes its ownership.
Knowing the financing can be done ticks an important box for Sprint as it contemplates a bid. Moving ahead would involve bigger hurdles, however, including complex negotiations among four publicly traded companies--Sprint and T-Mobile, as well as their majority investors, SoftBank Corp. of Japan and Deutsche Telekom AG of Germany, respectively. It would also likely face heavy scrutiny from U.S. antitrust authorities who have indicated they are wary of further consolidation in the sector.
A bid has also become more expensive. T-Mobile's shares have risen by nearly 19% since The Wall Street Journal reported last month that Sprint was stepping up its work on a possible deal between the companies. Sprint's shares are up about 7% over the same period.
There is no specific timetable for making the bid, but both sides are eager to come to a resolution as soon as possible so a merger could be wrapped up before a major government auction of wireless airwaves expected in mid-2015, people familiar with the matter said, and the sides expect it could take 12 to 18 months to win regulatory approval for a deal. Also, capital markets are favorable for funding large deals, and SoftBank Chairman Masayoshi Son has a strong desire to gain scale quickly in order to compete with the industry's larger rivals.
A deal between Sprint, the No 3. U.S. carrier, and T-Mobile, No. 4, would leave the market dominated by a trio of national carriers. The companies discussed a merger a few years ago, but ultimately backed down.