SoftBank’s Sprint to halt talks on T-Mobile merger

­­­­­­­­­­­Bloomberg

SoftBank Group Corp.’s talks to merge US unit Sprint Corp. with T-Mobile US Inc. have hit a serious snag, according to people familiar with the matter, throwing the deal into jeopardy after months of talks.
In the past three days, the companies have been unable to get past differences over valuation, according to a person close to T-Mobile parent Deutsche Telekom AG, who asked not to be identified discussing private information. Meanwhile, several members of SoftBank’s board have raised concerns about giving up control of the US wireless business, another person said.
Sprint and T-Mobile have discussed a merger for years with many fits and starts, and it’s unclear whether the companies will ultimately return to the table, the people said. The logic behind the deal has been that it would create a stronger third player in the US wireless market and could use 5G high-speed technology to deliver data and video service robust enough to compete with cable companies.
“It makes sense not to have just two with such big market share and two little ones,” SoftBank CEO Masayoshi Son said earlier. “Three is a real fight, a real competition.”
Sprint shares sank 9.5 percent in New York trading, while T-Mobile fell 5.5 percent. SoftBank fell as much as 5.8 percent in Tokyo trading. The companies had been ironing out final terms of the merger in the hopes of announcing a deal in mid- to late November, people familiar with the matter told.
While merger talks have been underway for months, SoftBank board members raised their concerns in the last few days because it’s now a make-or-break moment, with the sides very close to a deal, the person familiar with the matter said.
“SoftBank’s shares have climbed until now largely on expectations for the merger, so a negative reaction is to be expected,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. Deutsche Telekom and T-Mobile declined to comment. Sprint and SoftBank representatives didn’t immediately reply to requests for comment.
Investors have cheered on a combination of T-Mobile, the third-largest US wireless carrier, with No. 4 Sprint as a way to cut costs and forge a bigger competitor to take on AT&T Inc. and Verizon Communications Inc.
Without the merger, the industry could return to the intense price wars that have put pressure on profits for all four major carriers—to the delight of consumers, who have gotten heavy phone discounts and unlimited data service.
Sprint hasn’t had a profitable year in a decade, leaving a pile of credits from net operating losses that could benefit T-Mobile.
A deal between Overland Park, Kansas-based Sprint and Bellevue, Washington-based T-Mobile would be certain to attract heavy scrutiny from regulators, since it would reduce the four largest carriers in the country to three.