Sprint Corporation (S) is reportedly preparing T-Mobile bid

Posted May 1, 2014

Sprint is talking to banks to put together funding for a bid of smaller rival T-Mobile, according to several reports. Simultaneously, Sprint is working on easing regulatory concerns that the deal would hurt competition. Sprint, owned by Japan-based SoftBank Corporation, is looking to fund T-Mobile’s $50 billion price with corporate bonds and would cover the rest with syndicated loans and convertible bonds. Sprint is talking to JP Morgan, Goldman Sachs, and Deutsche Bank.

Sprint is also reportedly talking to Mizuho Financial Group Ltd and Citibank. Softbank will likely make a formal offer in June or July, according to Bloomberg.

Sprint would have to convince U.S. regulators that oppose consolidation in the wireless market that believes it would be bad for competition. Sprint knows that it may have to give up some spectrum holdings in the process.

Federal Communications Commission Chairman Tom Wheeler and U.S. antitrust chief William Baer believe that the market needs at least four major players to remain competitive. The FCC rejected a merger between AT&T and T-Mobile in 2011. The failure of this deal will cost AT&T a $6 billion break-up fee. The failure of this deal costed AT&T $6 billion because of the break-up fee. Sprint believes it could avoid the break-up fee by having Deutsche Telekom retain part of its stake in T-Mobile. Deutsche Telekom currently owns 67% of T-Mobile.