Sprint/T-Mobile backers engage Raine, JPMorgan and Goldman - sources
12 MAY 2017
Investment banks have secured mandates ahead of the expected deal talks between major wireless providers and their parent companies, according to a source briefed on the matter and two sector advisers.
Japan’s SoftBank [TYO:9984], the majority owner of US carrier Sprint [NYSE:S], is using longtime adviser Raine Group as well as JPMorgan, the sources said and added that Deutsche Telekom [ETR:DTE], the German majority owner of T-Mobile US [NASDAQ:TMUS], has tapped Goldman Sachs.
Sprint and Softbank declined to comment. The other companies and the investment banks did not immediately return requests for comment.
Bloomberg News reported earlier today that Softbank had made an initial, informal overture to Deutsche Telekom about the possibility of combining the US carriers in which they both hold controlling stakes. Sprint is positioned as the accounting seller in a potential transaction, the sources said.
This marks a turnaround since 2014, when Softbank CEO Masayoshi Son floated the idea of Sprint purchasing T-Mobile. At the time, Sprint was the third-largest US carrier, with T-Mobile in fourth and still suffering from a legacy as a straggler at the back of the wireless pack. The idea was that the two companies, combined, could form a much more formidable competitor to sector giants AT&T [NYSE:T] and Verizon Communications [NYSE:VZ].
At the time, regulators balked, effectively killing any potential deal. With the change of administration at the beginning of this year, and the entry of cable companies into the wireless market, the odds of a merger passing regulatory muster are widely seen as higher.
If a deal is reached, it will be subject to a review by the Department of Justice and the Federal Communications Commission.
Cable providers Comcast [NASDAQ:CMCSA] and Charter Communications [NASDAQ:CHTR] announced this week that they had formed a partnership to enter the wireless space, using an agreement that allows them to effectively lease space on Verizon’s network. The agreement includes a clause that requires one party seeking to conduct any M&A related to wireless to seek consent from the other.
It had been thought that Comcast could mount a bid for a wireless carrier, though its behavior in the recent government-run incentive auction of 600 MHz spectrum makes it seem like the company is pursuing a regional strategy. Comcast only purchased spectrum in the auction within its cable footprint, rather than nationwide.
One of the sector advisers said that, while Comcast and Charter’s strategy could change unexpectedly, they do not seem to feel an urgent need to acquire a wireless carrier.