T-Mobile purchase subject of SoftBank meeting with Deutsche Telekom

The potential purchase of T-Mobile US by Sprint has now boiled down to talks between the owners of both carriers. Sprint parent SoftBank is now meeting directly with T-Mobile parent Deutsche Telekom to work out the details of the transaction. Financing is key. Lack of it cost Dish Network the chance to purchase Sprint last year, but SoftBank has reportedly been advised by banks that it will have the financing to close the deal. SoftBank is looking to finance $20 billion.

Issues being discussed include the price SoftBank will pay for the 67% of T-Mobile owned by the German telecom firm. Also on the table is how Sprint and T-Mobile will be merged. The cultures at the two firm are not aligned. T-Mobile has become the darling of the industry with its consumer-first attitude, and there could be some problem deciding on which executives will run a combined operation.

Deutsche Telekom wants all cash for its T-Mobile stake, which has a current market value of about $26 billion. Banks involved in the financing are believed to be Goldman Sachs Group Inc., Mizuho Bank Ltd. and Credit Suisse Group AG. Any debt taken on for the transaction is expected to end up on Sprint's balance sheet. The Boards of both firms must agree to the deal along with regulators.

Another issue that needs to be negotiated is the size of any break-up fee. This is paid out in case one of the two firms decides to pull put of the deal. AT&T paid T-Mobile $3 billion in cash and handed over spectrum after deciding not to challenge the Justice Department. The agency wouldn't approve its $39 billion bid for T-Mobile in 2011. SoftBank Chairman Masayoshi Son has already said that his company owes too much debt to agree to a large break-up fee.

New Street Research analyst Jonathan Chaplin has a way that the deal could get around regulators. He believes that Dish Network, whose Chairman Charles Ergen is dying to make Dish a mobile operator, should try to make a deal with Sprint to host Dish Network's service on its pipeline. This way, the deal between Sprint and T-Mobile would spawn a new competitor in the business which would probably help the deal sail through regulators.

source: Bloomberg