The complex game of bluff that is playing out around Sprint could get even more complicated, with Japan’s Softbank indicating it could turn to T-Mobile USA ‘ recently merged with MetroPCS ‘ as a ‘plan B’. That could explain why the operator has refused to increase its offer for Sprint, despite its avowed eagerness to get into the US market, in the face of a counterbid from pay-TV provider Dish.
Sprint’s shares fell by the steepest amount in three weeks on reports that Softbank was in talks with T-Mobile. According to Reuters, the plan B could see the Japanese firm acquire Deutsche Telekom’s 74% stake in T-Mobile, reviving exploratory talks held last year after the German carrier failed to sell its US arm to AT&T. Instead, it agreed to a merger with publicly listed MetroPCS, but is expected eventually to exit the US altogether. Dish was also said to be in talks with DT back in April.
Under the terms of the MetroPCS deal, DT agreed not to sell its shares in T-Mobile for 18 months, but the exception is if it sells the stake all at once to a third party, its new CEO Timotheus Hoettges said at a shareholder meeting in May. ‘We are in a position to sell all shares in one go,’ he said.
Of course, the talks may be primarily posturing by Softbank to put pressure on Sprint’s special committee of directors not to delay a decision in order to talk to Dish, and resist calls to up its offer. And similarly, Dish may make overtures to DT for its own back-up option.
Shareholders in Sprint are due to vote on Softbank’s $20.1bn offer for a 70% stake on June 12 but will be keen to see whether, by leveraging Dish’s rival bid of $25.5bn for full control, they can get the Japanese firm to increase its price. Roy Behren of Westchester Capital Management, which claims ownership of more than 19m Sprint shares, said that he did not think Softbank would get the green light from Sprint ‘unless they bump up the offer’.
Both Dish and Softbank are keen to acquire a US carrier, the former to create a quad play offering and increase the viability of building out its own mobile satellite spectrum for LTE; the latter to extend its reach beyond its saturated home market and leverage its expertise in mobile broadband services and TD-LTE. Sprint is more attractive than T-Mobile because it also has just over 50% of Clearwire ‘ target of a separate bid by Dish ‘ which owns over 100MHz of 2.5GHz spectrum in most markets; it has a larger customer base than TMo; and it has invested in its technology neutral Network Vision platform, which could host multiple carriers, reducing roll-out costs for Dish or others.