SoftBank, Deutsche Telekom Reach Impasse in T-Mobile, Sprint Merger Talks

Published By : 31 Oct 2017 | Published By : QYRESEARCH

SoftBank Group Corp. and Deutsche Telekom AG have failed to agree upon a mutually beneficial deal to merge U.S. carriers Sprint Corp. and T-Mobile US. The matter comprising the main roadblock is the number of shares each company would hold in the joint corporation. SoftBank officials are reluctant to give up any control over Sprint Corp., with the company likely to have received close to or more than 40% of the joint Sprint-T-Mobile brand. Negotiations to merge the two carriers began earlier this summer and now represent the second failed attempt to merge the two companies, following an earlier attempt in 2014, which was called off due to regulatory concerns.

Merging Sprint and T-Mobile, controlled by Deutsche Telekom, would have created the third largest carrier in the U.S. with a subscriber base of more than 130 million, bested only by Verizon Communications and AT&T.

The failure to reach a merger agreement could be more damaging for Sprint Corp., which is in the middle of a rebuilding phase and has focused on cost cutting as a way to balance the sheets, which still hold the company to debt of US$38 billion. Despite growth in the number of subscribers, Sprint Corp. may find it difficult to level the field, since the growth in subscriber figures has been largely due to discounts. News of the deal falling through led to a drop of 13% in Sprint shares, though the fall was eventually steadied at 9.3%. Meanwhile, SoftBank could explore other options such as an attempt to acquire Charter Communications Inc., which would combine the cable company with Sprint’s telecom capabilities.

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