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SoftBank May Sell $20 Billion Stake in T-Mobile This Week

Pavel Alpeyev and Scott Moritz

(Bloomberg) -- SoftBank Group Corp. is closing in on a deal to sell about $20 billion of its stock in T-Mobile US Inc., accelerating efforts to raise capital after record losses in its investment business, according to people familiar with the matter.

The Tokyo-based company, which owns about 25% of T-Mobile US, plans to sell a slice of that stake to Deutsche Telekom AG so the German parent can own a majority and consolidate the unit’s financial results, said the people, asking not to be identified because the matter is private. SoftBank would then sell shares in a secondary offering to other investors and retain a smaller stake itself, one of the people said. The deal could be announced this week, the person said.

Talks are still ongoing and the deal could change or fall apart. T-Mobile US’s market value is about $126 billion, while SoftBank’s stake is about $31 billion.

SoftBank founder Masayoshi Son landed the stake in T-Mobile US just this year, after U.S. regulators approved the sale of his Sprint Corp. to its wireless rival. He is in the midst of selling 4.5 trillion yen ($42 billion) of assets to raise cash so he can buy back shares and pay down debt. Among his other prime assets are Chinese e-commerce giant Alibaba Group Holding Ltd. and SoftBank Corp., the Japanese wireless business.

“If SoftBank Group can renegotiate that sale, it will reduce pressure on SoftBank Group to sell its stakes in Alibaba or SoftBank Corp.,” Atul Goyal, senior analyst at Jefferies Group, wrote in a report.

The company already raised $11.5 billion from contracts to sell shares in Alibaba, its most valuable holding. Son said at an earnings briefing on Monday that the sale is the first tranche in a broader unwinding of assets.

Dow Jones, which reported the T-Mobile US sale earlier, said Morgan Stanley and Goldman Sachs Group Inc. are working to draw investors for the deal.

Long-term Control

Any potential sale could tip Deutsche Telekom’s stake in T-Mobile over 50%. The German carrier currently holds 43.6% and is already the controlling shareholder due to how voting rights were structured following the Sprint deal. A 7% stake in T-Mobile would be worth about $8.2 billion, according to New Street Research analyst James Ratzer.

“Another buyer might be willing to pay a higher price than Deutsche Telekom, so going to 50% now would secure longer-term control,” Ratzer said in a note.

T-Mobile completed its $26.5 billion takeover of Sprint on April 1, making it the second-largest mobile carrier in the U.S. based on the number of regular monthly subscribers. T-Mobile is the nation’s fastest-growing wireless company, and Deutsche Telekom’s largest source of revenue.

On a Deutsche Telekom earnings call last week, Chief Executive Officer Tim Hoettges was asked if the company would be interested in buying a larger stake in T-Mobile from SoftBank.

“It’s a great business to have, big attractive opportunities going forward -- we believe in the stock,” he said, adding that he could not “speculate on anything around these M&A talks.”

Deutsche Telekom’s shares rose 1.5% in early trading on Tuesday.

SoftBank and Deutsche Telekom are in the first months of a four-year lockup period that restricts the sale of T-Mobile shares. But the merger agreement doesn’t stop the companies from transferring stock between SoftBank and Deutsche Telekom. Even though Deutsche Telekom has a controlling stake in T-Mobile, it doesn’t have a majority stake. An outsider could purchase SoftBank’s shares when the lockup expires in 2024.

SoftBank Group said on Monday that its Vision Fund lost 1.9 trillion yen in the most recent fiscal year, triggering the worst loss ever in the Japanese company’s 39-year history. SoftBank had to write down the valuations of companies like WeWork and Uber Technologies Inc. because of business missteps and the coronavirus fallout.

The Japanese company also said on Monday it plans to spend up to 500 billion yen to buy back shares through next March, on top of an existing repurchase plan of the same size. That has helped SoftBank shares stabilize, rising more than 70% from their low in March.

The stock fell about 2% in Tokyo on Tuesday, as Japan’s indexes rose.

(Updated with additional context)

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