Sprint, T-Mobile talks collapse as Masayoshi Son goes alone

Bloomberg

SoftBank Group Corp.’s talks to merge US unit Sprint Corp. with
T-Mobile US Inc. ended after months of negotiations, dashing investors’ hopes for a wireless megamerger and signalling that unlimited data plans and heavy price discounting among US carriers will continue.
SoftBank Chief Executive Officer Masayoshi Son and Tim Hoettges, CEO of T-Mobile parent Deutsche Telekom AG, couldn’t resolve how to share control of the combined company in Tokyo, people familiar with the matter said.
SoftBank will hold an investor day soon to detail its plans for going forward alone in the US, the people said, asking not to be identified discussing private information.
“While we couldn’t reach an agreement to combine our companies, we certainly recognise the benefits of scale through a potential combination,” Sprint CEO Marcelo Claure said in a joint statement with T-Mobile. “However, we have agreed that it is best to move forward on our own.”
Sprint shares have fallen 14 percent since the end of September as deal talks lingered on without an agreement, and the stock may fall sharply when trading opens on Monday in New York. Walt Piecyk, an analyst at BTIG LLC, valued a stand-alone Sprint at $4 a share.
Investors had 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.
Both sides had been telling investors that a deal 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.
Even if they had arrived at a deal, T-Mobile and Sprint would have faced heavy regulatory scrutiny to complete a merger. The companies dashed a previous plan to merge in 2014 after meeting resistance in Washington. “These two are going to find compelling reasons to explore a combination again at some point,” said Kevin Roe, an analyst at Roe Equity Research.
SoftBank plans to boost its stake in Sprint, already above 80 percent, by acquiring shares in the open market, people familiar with the matter said, though it won’t seek
full control.
Deutsche Telekom, based in Bonn, Germany, has maintained throughout the talks this year with SoftBank that it should end up with control of the combined company.
Tokyo-based SoftBank had previously seemed amenable to a stock-for-stock merger that valued Sprint at or near its market price, with no premium, people familiar with the matter said last month.
T-Mobile is the healthier of the two US companies. Sprint hasn’t had a profitable year in a decade, leaving a pile of credits from net operating losses that could benefit T-Mobile.