Reuters: Deutsche Telekom to keep minority stake in T-Mobile if SoftBank deal goes through

dtheadquarters

Earlier on today, reports broke from Japan stating that Deutsche Telekom had accepted a buyout offer from SoftBank for its majority stake in T-Mobile US. We assumed, as many would have, that any deal would see the Japanese carrier take ownership of DT’s entire controlling stake in the Magenta carrier. Later on, however, another report claims that DT is seeking to retain a minority stake in the company it currently owns.

Reuters – citing sources familiar with the merger proposal – claims that Germany’s Deutsche Telekom AG is willing to keep a minority stake in a deal to sell T-Mobile US Inc to Japan’s Softbank Corp, but other details such as price and financing remain to be worked out, according to sources familiar with the situation.”

Financing has been a point of discussion ever since rumours broke last year that Sprint and T-Mobile could merge. It’s been reported on several occasions that Masayoshi Son, SoftBank’s CEO has been courting large banks and financial institutes in order secure funds for a proposed bid. As it stands, TMUS is worth around $27 billion.

If the deal is blocked by the Department of Justice or the FCC, or both, Sprint would also presumably end up owing T-Mobile compensation. Recent rumours have indicated that to be around the $1 billion mark, some $3 billion short of the amount T-Mo received from AT&T after its failed buyout attempt in 2011.

On the positive side for T-Mo fans who dread to think of a merger with Sprint going through, Reuters also reports that a deal is nowhere near closing. Not even remotely.

But sources familiar with the talks told Reuters that while the two sides are keen to get a deal done, a transaction was complicated, including the issue of getting regulatory approval – it would reduce the number of major U.S. mobile competitors to three from four. The sources said no decision was imminent.

Regulatory approval is a major hurdle, as is the fact that the offer from SoftBank hasn’t been made official. At the moment, it’s still a rumor, albeit a very well-sourced on.

In short: We’re very much in wait and see territory. But it’ll be interesting – if a deal goes through – to see how much of a stake DT wants to keep hold of, and how much of the 67% SoftBank is offering to buy.

Via: Yahoo! Finance

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  • JBLmobileG1

    They are idiots! Why would they even mention a possible deal or buyout? Won’t this affect them from being able to buy spectrum in the upcoming auction? True it has been rumored for some time now, but doesn’t this make it official, even though it could be a ways away… possibly even never happening anyways? Personally I like knowing that Tmobile is still in control but if the deal doesn’t go through, I guess we will be saying bye bye to the extra spectrum that we needed, unless of course we end up with some of Sprints.

    • http://aikenareaprogressive.blogspot.com/ jovan1984

      The thing is: T-Mob will get some of Sprint’s spectrum if the deal fails. It may not be in my region (where Sprint service is really bad north and west of my western Barnwell County location), but it will be somewhere in the States.

      • philyew

        Where did you hear that? All I’ve seen quoted is a cash value for the break-up compensation…nothing at all like the deal they got with AT&T.

      • Roger Sales

        The combined company would have to sell some spectrum to be under the FCC percentage limit.

    • mikey

      No, technically unless a deal is approved before the auction, it should not have any impact on it. Until it is approved there are still 4 major carriers so the situation is still the same as current, so no reason to change the terms of the spectrum auction.

      • macman37

        Wrong bro,

        It was mentioned a few weeks ago that any attempt for Sprint and T-Mobile to merge may result in having the restrictions placed on Verizon and AT&T may be reconsidered and removed.

      • philyew

        The wording of the FCC statement indicated that they would consider changing the rules if any consolidation was in the pipeline.

    • macman37

      Even though this strategy is a “Rope-A-Dope” maneuver to get more money and spectrum just like how they did it with AT&T, the break-up fee that Softbank/Sprint offered was not worth this risky decision. Even if there is enough time for the FCC and DoJ to block this merger/acquisition, this is still a bad move at the wrong time. The FCC will probably reconsider their restrictions that they had placed upon Verizon and AT&T; and probably allow them to have a buffet on the 600 Mhz auction.

  • sushimane

    come on doj and fcc reject it.

  • Roger Sales

    I’m in a place as a customer where I really enjoy everything about the experience – the coverage, the pricing, even the interface of the new website is fantastic with the way they display usage per device. I do not want to go through the possibility of that changing dramatically. That and I do not think the merger is a good idea.

  • kyo251

    Per the contract with metro DT can’t sell part of their stock. The loop hole was the only way to sell so sell it all.

    • kyo251

      Was to sell all at once it not sell at all until the 18 month grave period is over.

      • philyew

        Since the deal wouldn’t close until long after the 18 month moratorium expired in November, that really isn’t an issue any more.

  • Jay J. Blanco

    Let’s see how this plays out

  • Thornee

    This merger is bad news. No one likes that T mobile is a like a 5 dollar whore who does tricks for the highest bidder. There is a psychological effect when a company tries and tries to sell itself to the highest bidder. Worst case scenario we vote with our wallets and move to Cricket. Once Sprintmobile loses a few million then maybe they will change their ways.

    • itguy08

      Do people honestly care? I mean who cares where the $$ goes if the service is acceptable?

      • Roger Sales

        It’s not just about the service –
        1)We’d be inheriting a network that is known to have gigantic problems with PHONE calls, let alone data(and one that will probably be phased out post merger).

        2)There’d be no incentive to offer unlimited data besides being the the only one to do so with a merger.

        3)Their short term costs merging the networks will be really high because of the technology AND frequency differentation – this is not like metroPCS which operated predominantly on building out in large cities with lots of people and using roaming agreements to cover everything else – there are a lot of towers that would need to be cut down as a result of overlap and that means terminating lease agreements earlier than expected.

        4) There’d be a gray area period where service would be less than optimal on both networks while one is being turned off/customers are moving onto the “winner”(Sprint customers will remember this as the current situation between Wimax and LTE). Handsets would have to be replaced sooner than expected which means consumers would be spending more in the immediate future even if they offer an “Incentive” discount like Sprint did with USCellular customers.

        5)In every merger ever companies always promise that nothing will change and that it will benefit the consumer in the long run, and it’s never really been true. Masayoshi Son says he wants to bring big data networks at low costs as a result of the merger. What this might mean is “I want to create a larger premium network so I can justify charging more for that quality and scale”.

        If T-Mobile would stay T-Mobile as it is right now in terms of pricing, plans and reliability in the longterm and the only thing that would change is enhanced coverage because of more customers, of course I’d be for it – but that is not a guarantee John Legere or Masayoshi Son will ever make. Companies want to save money and more importantly – make more money.

        • xmiro

          CDMA will be turned off if a merger happens. That way SoftBank customers will be able to roam while in the US

        • Roger Sales

          I’m just curious how long you think it will take to turn off a CDMA network that spans 52,000 towers and 54 million customers, because my statement accurately depicts the logistics. In the short term the CDMA network will still be around.

        • itguy08

          #1 – We won’t be using their network. For the most part we can’t since they are CDMA and we are GSM. The LTE could be used. And for some it would be better. Where I live there is spotty T-Mobile service (I knew that going in). I can see the Sprint tower from our house – it was built last year.

          #2 – Really? Competitive advantage from the other 2. It’s one of the differentiators and one that works well for T-Mobile. That and abolishing overages.

          #3 – I think this is why VoLTE is getting pushed. You could easily enable VoLTE on T-Mobile phones (and Sprint phones) and use the combined network. Sunset the CDMA stuff at some point in the future and get everyone on VoLTE and GSM. Would work relatively well and be a lower cost than sunsetting one network.

          #4 – I went through the Cingular/AT&T merger as a Cingular customer and little changed. When I wanted to upgrade I just went to the AT&T store. Service was about the same. Could be similar with this one with VoLTE. Heck, I’d get better service if I could “roam” on Sprint as the tower is closer and the town I live in (Carlisle, PA) is EDGE on T-Mobile and LTE on Sprint.

          #5 – I dono on that. Another merger that didn’t really increase prices was Sirius/XM. I’m paying roughly the same I did back in 2005. Cause they all realize that at some point price wins and people will migrate away if it’s too expensive. Raise my cost to $200/mo and I’m ditching the phone altogether.

          As a T-Mobile customer and shareholder I’m torn. I like the fact that the scale of the companies would be better and increase coverage at home (via Sprint). But I think T-Mo has tremendous momentum and if they keep a laser focus on increasing coverage they will be a solid #3. According to Root Metrics they are in many places. They just need to dump $$ into the network ASAP.

        • Roger Sales

          You can’t push voLTE to every customer immediately, it’s unproven and seeding the market with handsets will take years. You talk of a merger like it’s going to be easy on customers – it’s not. And you’re brain dead if you think AT&T is the same post merger with Cingular today as it was years ago. They cut jobs, increased prices and were the first to abandon unlimited data. Remind me why you think this merger won’t do the same down the pipeline?

        • itguy08

          For VoLTE – they are doing the testing. And it’s supported on a wide range of phones – most need a software update and that’s simple to manage.

          Yes, AT&T is not the same company it was in 2004 when the merger was happening. It wasn’t till, what 2010 when they canned unlimited data? And you can blame a lot of that on the iPhone. And prices are still cheaper than Veizon. If you run the #’s, AT&T is smack in the middle, price wise.

          Again, for most customers a merger usually is easy. You continue down the same path and when it’s time to upgrade or whatever you get converted to the new. Then again I don’t do drama and get my panties in a bunch.

          You also have to realize the reason T-Mobile is cheaper is that the coverage is less. For many (including myself) the tradeoff is fine. If you increase coverage you may need to increase prices. Those cell sites need care and feeding and if you don’t get enough new subscribers the $$ has to come from somewhere.

          I can’t say I am for or against the merger. I see some upsides and I see some downsides. I think 4 is a good mix of carriers but would love some additional coverage.

          I’d also argue there is already collusion in the wireless market. Run the #’s and the 3 of the 4 are within $5/mo of each other for similar plans. T-Mobile is the lower at around $10-20/mo savings. It’s funny how Verizon or AT&T announce something and soon after the other does the same….

        • Roger Sales

          the iPhone may have started the need, but the company starts the greed.

          Also, you cited Sirius/XM merger as one that did not impact pricing, but Sirius/XM is not a service that is how should I say….nearly as necessary as a cellular device? Not even close. They couldn’t change prices because some people can and will just opt out. You can’t really opt out of a cellphone these days.

          My Anti Merger sentiment largely stems from the fact that I understand that the market is mostly about bottom lines and not for the customer, especially when I look up north in Canada. Every pro merger conversation that has been had has been in Europe between two GSM carriers. There is no precedent for what will go on between S and T-M.

          Mergers within GSM companies are easy and not messy. Sprint is not a GSM company. When Sprint merged with Nextel it got messy and nine years later are still dealing with echoes of that mess – this is not “drama” this is reality and fact. It’s going to be a balancing act of spectrum and resources per market per usage in that market while one network is phased out. There new slogan should be a Facebook relationship that is consistently stated as “It’s Complicated”.

          But hey, what do I know, I mean my best friend is a Sprint customer and I live in the NYC metro area and the only time I’ve ever seen her have LTE is when we are hugging the Hudson river in the park (we live on the jersey side which is “alleged” to have LTE service. I happen to have had full service here since about July-August.)

    • Marco H.

      ATT bought Cricket and merged it with AIO.

  • rbaggio10

    it sounds to me that Softbank is buying t-mobile not sprint merging with t-mobile I know soft bank would own both. I think that would be the way around the fcc, especially since DT wants to keep a small stake

  • Farmer Ted

    Basically today’s “story” was a rehash of old news with nothing new or concrete. Yes they have talked/are talking. Yes they are both interested. But little things like details and if/when.

    • bkin94

      more like reconfirming the old news. the news is that there are now different people saying that the companies are in talks. also, today is the first time someone has said that DT has accepted the deal. it’s another step, but you are right that it’s the same idea. maybe just a little further along

    • xmiro

      Someone at SoftBank is using their reporter connections to keep the story alive it seems

  • PapaSmurf

    An easy billion made for Tmo once again!

    • JBLmobile

      Yeah a Billion but unfortunately there won’t be any spectrum to spend it on. Also, if as many customer leave like they did with the possible At&t merger, they will probably lose more money than they gained because customers won’t want to risk playing with matches anymore because this time they might get burned.

      • Guest

        how do you get burned? we don’t have any more contracts so if they do anything we don’t like we can switch to any other carrier we want

    • Adrayven

      If they try to really push this through prior to the 600Mhz auction, the FCC specifically stated that they would not limit ATT or Verizon in the auction if Sprint attempts to merge with TMUS..

      So what Spectrum would they spend this on? They would basically be blocked out of the low spectrum they really need.

      • Roger Sales

        Yeah, I think the FCC is intending to force their hands in the short term with the limitation for the auction and therefore having to plan for an individual long term. I just hope that this whole deal loses luster. I’m totally serious about loving T-Mobile’s new website, they made it so much easier to manage accounts I would die under a Sprint style regime.

  • Adrayven

    So wait.. really, they are where they were before..

    – SoftBank wanting to do this
    - DT interested but doubting it’s likely
    - Both DoJ and FCC shaking their heads no
    – SoftBank not having the direct money and leveraging a lot of debt to do it

    .. Nothing has really changed but the fact that some Japan source ‘leaked’ that they talked..

    Which is no surprise.. but keeps this in the media’s eye..

    [ !WARNING WILL ROBINSON! WARNING! ]
    - Why does this stink like a SoftBank media play to keep this alive?

    What really will happen is TMUS will be screwed out of the 600Mhz auction.. and ATT/Verizon will be unhindered in hoarding the majority of that low band spectrum.

    • Farmer Ted

      At least one analyst was speculating exactly this – a manufactured story leaked by Softbank to keep the story in the media cycle and thus in front of regulators. If there was a betting line on this, that’s where all my money would go.

    • xmiro

      they’ve been squabbling over the break up fee (Sohn wants to eat his cake by not paying much) and management control for months. Hoettges wants T-Mobile as the surviving brand, even Legere said that months ago, and he wants TMUS team to take over and run everything. I still think we might end up with a version of EE’s UK.

      Of course SoftBank is leaking this

      • RLB63

        As long as they keep TMO policies I think the Sprint name might be better to keep. If everything else changes for sorting customers it might prevent churn. TMO s customers will be pacified with management and plans staying in place. Really as long as nothing else changes do you care about the name? If he changed the name to Blue with a massive ad campaign but everything else stayed the same with massive new spectrum options and more coverage would you switch? Most customers zeroed with to because of price. I have been with them since they were Voicestream. Yes people have some investment in the name but that still be easier for the TMO customers to handle than Sprint customers where EVERYTHING might change including having to eventually change phones to fit with TMO standards that reduce customer pain points. Also there is a major investment in NASCAR that I have mentioned elsewhere on the site.

        • vinnyjr

          T-Mobile name has major interest in MLB. Screw the Nascar ties, you’re talking pennies compared to the MLB ties with T-Mobile.

        • DirkDigg1er

          As does Sprint with the NBA.

  • ccnet005

    Oh god!
    First we lose Carly, now this!!!!

  • randian

    Could this have been leaked specifically to screw T-Mobile and Sprint out of 600 MHz spectrum? I wouldn’t be surprised if this was leaked, not by Softbank, but by AT&T or Verizon.

    • xmiro

      Softank is leaking the info

      VZ and AT&T have nothing to do with it

    • philyew

      The FCC will only change the rules if there is a concrete deal on the table. There statement indicated that, if one was being actively pursued (ie. had been submitted for formal approval), it would likely be considered a done deal for the purposes of the 600MHz auction rules.

  • Stinkypinky

    What happened to my earlier comment?

  • Stinkypinky

    Have ya’ll heard that Comcast is now possibly a 3rd player in the race to buy T-mobile?

    • Aurizen

      Lies

      • enkay1

        Analysts say otherwise.

        • Aurizen

          pfft, speculation.would be interesting… especially if John Legere is controlling the company.

  • dontsh00tmesanta

    So T-Mobile remains T-Mobile?

  • Bryck

    Lol, T-Mobile stock is sure not minding the speculations.

  • hola

    Hopefully if talks fall through CHINA MOBILE buys them :D. they are looking at the US wireless market. What a power house they are and the funds available to them are endless.

    • JBLmobileG1

      I think I would take any carrier over a Chinese one. It’s bad enough almost anything and everything is made there.

      • Chad Dalton

        agreed… “made in China”…ehh!

      • maximus1901

        And I’m sure you protest this by dutifully only buying American made when you can?

  • Paul

    “…another report claims that DT is seeking to retain a minority stake in the company it currently owns.”
    We don’t want be burdened with the US side of things, but we don’t want to let go of a growing power over there. Seems DT doesn’t wanna break up as much as they let on before.

    • Nick Gonzalez

      That’s how I read that article!
      +1

    • philyew

      Retaining a minority stake doesn’t make much sense unless they see it as providing a way of incrementally getting around the regulatory objections.

      If the deal needs to give Softbank overall control, sufficient to ensure a merger can ultimately take place, then Son needs 51%, leaving up to 16% in DT’s control.

      As DT in not only the major stockholder, but also the primary creditor, they need sufficient power to ensure that their overall interests are protected. Does 16% of TMUS and 0% of Sprint achieve that?

      It would surely be better to get a deal that extracts them entirely and pays off the whole debt owed to them – unless the incremental mechanism would pass federal scrutiny in 2014/15 and set up a scenario where approval of the final, minority holding sale had to be approved at a later date.

      This would lead, in the short term, to some highly cooperative, but independent activity from TMUS and Sprint, setting up the possibility of an eventual merger when the full fruits of consolidation could be harvested. Did the EE joint venture in the UK start out somewhat like that, Cam?

      Ironically, that working model for the interim phase is one that is quite attractive; and might extend beyond the two companies to involve other participants in the CCA, around their idea of a collaborative data hub. Unfortunately, the end game is still a consolidation that threatens competition and is likely to enshrine profit margins in the 50-55% range for the industry, rather than the 30-35% which is much more desirable from the consumer perspective.

      Still, all food for thought.

      • Paul

        While verbose, you bring some good food for thought to the table.
        I think the FCC and DoJ will see it as Sprint and T-Mobile have the same majority entity, and that would likely be viewed as a conflict of interest.

        • philyew

          Not verbose enough, unfortunately. What I meant to say was that a transitional position giving Softbank 49%, might enable all the rest of the stuff I referred to. ;)

  • Fr0stTr0n

    Cliff notes version?

  • Nick Gonzalez

    Assuming this is all true:
    DT needs to make up their damn mind. If they want to focus on European markets,fine go do it. Just cut ties completely with T-Mo US, why linger around with 15% or 20% (just random numbers) of a division you’ve been wanting to get rid of for a couple years now.
    Ok, I’m done ranting.

  • JosephLagalla

    Wasn’t there a clause in the merger with Metro that DT could not sell for a set amount of time? The loophole that DT had found was that they could sell all of their stock in one go. So either this isn’t happening for a good amount of time or DT has no interest whatsoever.

    • philyew

      The 18 months is up in November. Starting a part sale process in the next month or so wouldn’t be resolved until then anyway, so the idea is still viable.

  • vinnyjr

    Letting this leak out of the bag could really slow down or maybe kill all future growth in T-Mobile. Not many people will want to get involved in a Carrier knowing the future is up in the air not to mention all the phones will have to be changed if they do go forward with this Catastrophe. This is so stupid on so many fronts. T-Mobile DT just sucks to pull the plug on all this hard work and growth from John Legere and company.

    • GinaDee

      That was all part of the plan. Turn everything around in a pinch and make T-Mobile USA more valuable for a sell.

      Legere was hired to do nothing more; nothing less. Uncarrier this and that were great but were really just distractions.

      If DT would have put enough effort into TMUS from the get go they’d have a much more successful US venture. They just waited to the last minute to sell with a bang.

      • Sectime

        Given Legere, Son, and Hesse long history together I think you are correct. Plus most upgrades were funded by AT&T breakup fee.

    • maximus1901

      Not many people visit this site or care.

  • notyourbusiness

    Honestly, what’s the point? DT needs to make up its mind. Either sell like you’ve claimed to have wanted to for years or just hold onto T-Mo US. If you ask me, the latter is the better option because T-Mo has been doing great things as of late.

    • maximus1901

      How much in dividends has tmus payed out? How much profit have they made? The only contribution to DT has been growth in tmus stock which happened because of assumption that it would sell to sprint.

  • wsj

    Until everyone move to LTE, not going to happen. Gov’t wants four carriers for a reason, that 2 on CDMA and 2 on GSM. Unless Sprint is going to run 2 networks again.

    • guest

      Everyone is on gsm lol! What do you think lte is?! There WERE 2 CDMA and gsm carriers but lte is gsm based. They’ve all gone gsm- sim based.

  • Jason Crumbley

    The only way I would ever be down with this is if T-Mobile swallowed Sprint, everything stayed T-mobile, and all traces of Sprint were done away with. I still don’t like it for the amount of people that would lose their jobs, or the amount of debt.

  • bottle neck

    why isn’t there pressure from the govt to make a carrier like US Cellular expand their presence and become a national player? With the upcoming auction of 600 and the rules that were put in place to favor the smaller carriers, it would give them a chance. This would take pressure off deals with T-mobile.

    • Jarobusa

      If UC Cellular had money I’m sure they would expand.

      • Jay J. Blanco

        Definitely if U.S. Cellular could have bought Cricket or merged with any other small regional player if they wanted to. They’ve set back and waited too late. Sold Markets to Sprint. U.S. Cellular is one step from Cincinnati Bell

    • sushimane

      im gonna take a gamble when the fcc and doj recject the proposal of softbank to buy tmobile. im gonna say tmobile is gonna invest it and try to buy us cellular in the future lol. that’s one less billion dollar to use lol. maybe the fcc and doj would approve it. consolidating the regional carrier then consolidating the nation wide carriers.

  • Samuel Bennie

    I feel like DT is doing this to try and see i the Gov’t approves or not and if they don’t DT wants the $$$$$

  • Wilfredo Martinez

    Blah Blah Blah… Son: “Oh America, ooooh, I am really out of the kindness of my heart looking to help Americans save more money and destroy Verizon and AT&T, but Sprint can’t do it on its own, we need T-Mobile! Oh PlZ U.S Government FCC and DOJ let us buy T-Mobile so we can save consumers from those EVIL Verizon and AT&T!”

    This is such B.S… Here’s the REAL intentions behind Son… Son: Oh America, I am a greedy monster, who is looking to better myself and make more BILLIONS, the only way I can do it is if I had the scale and market power that Verizon and AT&T have, but to do this, I need T-Mobile, PLZ U.S Government FCC and DOJ let us buy T-Mobile so we can screw U.S consumers exactly the same way Verizon and AT&T is and make BIG $$$!

  • Tmo Rep

    I wonder who, and how many, would lose their job should this merger go through. I kinda like working for TMo. Would hate to, you know, NOT any more.