BackSprint said to end T-Mobile discussions, to name new CEO
Regulatory concerns outweigh the potential benefits of combining the two US wireless carries, says a source
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New York/Berlin: Sprint Corp. ended talks to acquire T-Mobile US Inc., a person with knowledge of the matter said, as regulatory concerns outweighed the potential benefits of combining the third- and fourth-largest US wireless carries.
Sprint plans to name Marcelo Claure, the founder of mobile-phone distributor Brightstar Corp., as its new chief executive officer as soon as Wednesday, according to two people familiar with the situation, who asked not to be identified because the information is private. Claure will replace Dan Hesse, who has led the company since 2007.
The decision by Sprint ends a nine-month effort by Japanese billionaire Masayoshi Son, whose SoftBank Corp. controls Sprint, to create a rival to Verizon Communications Inc. and AT&T Inc. Son had envisioned combining Sprint and T-Mobile to create a formidable competitor with the financial power and airwaves to serve more customers and eventually deliver faster broadband to consumers more cheaply than cable.
T-Mobile was willing to move forward on a deal with Sprint if it ceded on sticking points including over the financing structure, people familiar with the talks said. While both companies viewed approval for a deal as a long shot, given the current administration’s stated goal of having four competitive wireless companies in the US, Sprint ultimately decided the regulatory environment was prohibitive, one person said.
Financing structure
The companies couldn’t agree on how much SoftBank should kick in to finance the deal, or how much Sprint should raise, which would be on the new balance sheet of the combined company, one person said. They also couldn’t reach an agreement on how much of the financing should be bridged, the person said.
Scott Sloat, a spokesman for Sprint, declined to comment. as did Anne Marshall, a spokeswoman for T-Mobile. Matthew Nicholson, a Tokyo-based spokesman for SoftBank, declined to comment. The Wall Street Journal reported earlier that Sprint dropped its plans to buy T-Mobile.
SoftBank fell 3.5% to 6,969 yen at 10:35am in Tokyo trading, extending its decline this year to more than 20%. T-Mobile climbed less than 1% to $33.91 on Tuesday in New York, giving the company a market value of $27.4 billion.
Dish Network Corp. chairman Charlie Ergen may see the collapse of the deal as an opening.
Ergen, who bid for Sprint last year and lost to SoftBank, said in May that he was willing to watch the Sprint pursuit of T-Mobile from the sidelines and wouldn’t get in a bidding war. He did say then that T-Mobile was of strategic interest to Dish if there was an opening—for instance, if SoftBank’s bid were blocked by regulators.
‘Drunken fools’
“I wasn’t a very good poker player, but when a bunch of drunken fools were throwing money around occasionally I was able to pick up the pot at the end of the day," Ergen said at the time. “My recommendation to our board would probably be let’s see what happens."
Dish is planning to report quarterly earnings results on Wednesday.
America Movil SAB, the Mexican telecommunications company that is studying how to break apart its wireless and and landline phone operations, also could make a run at T-Mobile.
A representative for Dish and a press official for America Movil declined to comment on their possible interest in acquiring T-Mobile.
T-Mobile intends to turn down Iliad’s proposal, people familiar with the matter said on Tuesday, putting pressure on the French telecommunications company to raise its offer. Iliad, which has offered $15 billion in cash for 56.6% of T- Mobile, is seeking partners to help finance its bid and allow it to make an offer for a larger stake, another person said.
Sprint’s bind
The collapse of the deal may leave Sprint in more of a bind than T-Mobile. While Sprint finally ended more than six years of losses with a $23 million profit in the fiscal first quarter, it still lost 245,000 contract subscribers. T-Mobile CEO John Legere has led the way on lowering prices to lure more customers, and last week raised its forecast for subscriber growth this year. T-Mobile added 908,000 monthly branded customers in the three months through June.
T-Mobile and Sprint appeared close to a transaction in June, after both companies reached basic agreements on price, capital structure and termination fee, people familiar with the talks said then. The terms were never formally set in stone, and T-Mobile pushed to improve the particulars in its favor, including the price per share, three people said on Tuesday. Bloomberg
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