T-Mobile merger with Sprint looks more likely as Softbank and Deutsche Telekom agree on sale

Softbank is making an end-run around concerns about a merger of Sprint and T-Mobile US by instead hitting up T-Mobile's parent company Deutsche Telekom. As reported by Japanese news agency Kyodo, Japan-based Softbank has entered into an agreement with Germany-based Deutsche Telekom to buy the latter's ownership stake in US carrier T-Mobile. The US Federal Communications Commission and Department of Justice have expressed their concerns about the potential for such consolidation in the US cellular market, and the move by Softbank would likely end up still being heavily scrutinized.

The end result (a Sprint/T-Mobile merger) would likely still be the same, though this move might bring the two companies as separate entities under the same umbrella corporation first. Softbank bought Sprint last year for $21.6 billion, and they've been vocal about their desire to also buy T-Mobile. Sprint, too, has been pursuing T-Mobile, though it's more likely that Softbank's even deeper pockets would be better suited to such an acquisition.

We don't have any indication right now of how much the deal may end up costing Softbank (estimates range up to $50 billion), though T-Deutsche Telekom's 67% stake in T-Mobile US. When AT&T attempted to buy T-Mobile and was shot down in 2011, the purchase prices was set at a whopping $39 billion. T-Mobile of 2011 was a radically different company than T-Mobile of today. A good portion of T-Mobile's success today actually comes thanks to the failure of that acquisition, which garnered T-Mobile a multi-billion-dollar break-up fee from AT&T, as well as the spectrum needed to enhance their network.

Deutsche Telekom has expressed interest in the past in unloading their share of T-Mobile US, much like last year's massive sale of Vodafone's stake in Verizon Wireless to Verizon. With Deutsche Telekom wanting out of the US, and Softbank wanting to expand rapidly in the US, it seems all but inevitable that T-Mobile will trade hands. But will such a sale and merger be good for US consumers, and what will happen to the Uncarrier in the process?

Source: Kyodo; Via: Reuters

Derek Kessler

Derek Kessler is Special Projects Manager for Mobile Nations. He's been writing about tech since 2009, has far more phones than is considered humane, still carries a torch for Palm, and got a Tesla because it was the biggest gadget he could find. You can follow him on Twitter at @derekakessler.

  • Considering Sprint uses CDMA and T-Mobile is GSM (here in the states anyway. Not sure about the rest of the world) could make this acquisition more expensive. They got to merge the two, no?
  • Nope.. don't got too.. Thats just hyperbolae from analysts; if TMUS stayed independent then the 600Mhz auction would be very good for TMUS.. they would likely get a decent amount of low band national coverage.. But the limitations the FCC put on it say if Sprint goes for TMUS, they will NOT limit ATT/Verizon.. Basically, DT/SoftBank just screwed all the small carriers out of a decent chance in hell of getting much, if any, of the low band 600Mhz.. Much less Sprint/TMUS getting any.. all their funds will be tied up in the merger.. This is the stupidest move.. it's a bonehead move.. TMUS was on the rise.. had competent management and a plan forward.. now we get to see the incompetent company take over and mess it up.. with bad management, slow network, slow to upgrade coverage, and lots of bad debt from Sprint AND SoftBank... just bad, bad, bad..
  • Yes, and my guess is that the new company would be CDMA because that is what Softbank is in Japan.
  • AT&T would *love* T-Mobile going CDMA. As the only GSM carrier left big price increases will swiftly follow. They'd probably start locking all their phones again too just because they can, even though it won't matter as you'd have no competitor to take your unlocked phone to.
  • CDMA is dead though if the merger were to happen they would change all that spectrum to LTE and go for VoLTE no reason to waste money adding extra steps
  • AT&T has never stopped locking their phones. I know. I had to explain the policy.
  • I'll be honest i don't get the theory of merging two struggling companies. Plus the softbank ceo continually rails about the poor internet speeds in the u.s. but i see sprint doing nothing to build more towers and up the capacity and reception in my area. They can do as many network upgrades but it's like changes to the LA freeways, it just mean more space for traffic jams and continued slow speed driving. It's like JC Penny buying Sears and hoping that it will somehow make Macys or Nordstroms. Regardless as a sprint customer I like my unlimited data and cheap price so i hope they sort out their crap by the time i upgrade my phone. The only way i care about his is if it means my phone now works on all tmobile and sprint towers and somehow the end result is better data speed and i get a signal in places i didn't before.
  • TM is not exactly a struggling company, yes profits are down but subscriber growth is going through the roof. Once TM pays the ETF fees of the new subscribers and recoups these costs along with their rapid network upgrades I think the profits will come.
  • Yes but the bottom line isn't good. More customers and less profits is struggling. If you have to give away your product at a steeply discounted price to get people to use it it's a problem. Hell it's doing worse than sprint and i think sprint is struggling. And all i'm not sure listing fees TM has to pay and the added expenses of expanding the network prove it's doing well. It just shows they have even more expenses than the other guys. I love low prices. I use sprint. But my understanding is that TM isn't exactly doing well. They aren't gonna challenge Verizon anytime soon.
  • At first when Softbank announced this I thought good, now seeing how TM is doing on its own, the upgrades to their network and their aggressive marketing I would like to see TMUS stay independent of Sprint. Softbank has not impressed me yet with its ownership of Sprint (I am a Sprint customer), so I am taking a wait and see position.
  • yep. my sprint is as spotty as it was before.
  • Well, this is going to complicate my decision as to whether I switch from Sprint to T-Mo any time soon :-P
  • Hmmm.... Some how I don't think them merging is a bad thing, but I'm not sure it's a win for customers either. As far as network wise we many multi band phones these days that both support CDMA, dc-gsm, and lte, so I wouldn't say that anyone is a "_" network these days. Besides I'd like to see all carriers sell unlocked devices that can be used wherever I so choose as a customer like many countries around the world. Sent from the iMore App
  • I liked what I saw of Masa (SoftBank CEO) during his interview at they Code Conference. However, one comment above regarding the low band spectrum auction and the position of TMUS makes me wary for them. Even though I'm not in the US, I'm still rooting for them and would love to see them shore up more spectrum. I just wish this deal doesn't counteract that situation. (Also, they should obviously keep John Legere as TMUS CEO)
  • I really wish you and the rest of the folks writing about this would stop calling it a merger. When one parent company owns two others, those two subsidiaries aren't one merged company. Will they be merged someday? Maybe. As it stand now, they'd both simply be owned by Softbank. The headline is sensationalism.
  • With the money Softbank has, Sprint could easily buy as much spectrum on next year auction as the big two, but it would take them a few years and extra billions to build out the network to make use of the spectrum, not to mention that, yes the network would get better, but the return on the investment will also take years, as more customers join them because of increased foot print and improved network. That money it's better spent in acquiring a company with millions of paying subscribers and an already built network. The money will start coming right away, redundancies in salaries and fixed expenditures will get reduced rapidly, and the network infrastructure will also get stream-lined in a relatively short period, by getting rid of overlapping cell towers and base stations. With the new 8t8r antennas that Sprint it's starting to deploy, they will have the capabilities , due to the characteristics of it, to equal the reach of their 2.5ghz to their 1900mhz PCS band.
  • with T-Mobile's predominantly foot print in big metro areas, that's exactly what Sprint needs to make the 2.5ghz spectrum really take off, they'll have a lot of towers for coverage and lots of spectrum for capacity, outside of mayor cities they would use the old Nextel spectrum in the 850mhz and obviously the 1900mhz PCS.
    This is why they pulled out of the H block PCS auction this year, they're banking in acquiring TMUS, and making the big cities, where the bigger chunk of the population lives, their bread and butter. if they can just gain a 5% to 10% of market share in those 100 markets or so, where they plan to deploy Spark in the next 3 years, that's a good 15 to 20 millions added subscriptions, and in big cities with a dense deployment of towers and micro cell sites you could really do a lot of damage in the 2.5ghz band with all the continuous spectrum that they have. They have an average of close to 80mhz of spectrum in most of these cities, with a TDD -LTE, which uses the spectrum a lot more efficiently that FDD-LTE, being used by everyone else.
  • And that is the problem. Sprint already HAS a lot of spectrum and NO will to build out their own network. This is NOT a good deal for current T-Mobile customers. Most of us are happy. The ones who aren't currently will be soon because John Legere IS building out our network (with spectrum from the failed AT&T deal, and a purchase from Verizon; we also sold some different spectrum TO Verizon).
  • B4 the Sofbank acquisition, they didn't have the spectrum or the money for the build out, remember that Sprint bought Clearwire with SoftBank's money. As far as how good a job Legere its doing, here's a math problem, and you tell me how good it looks for TMUS.
    First of all, TMUS already raised the prices at the end of March, because the were loosing the shirt off their backs, and investors don't like that.
    And here the math problem I mentioned. I left Sprint for TMUS on early January, TMUS paid me $900 on ETF's, plus $1000 for 5 BBerries that I traded in at an average cost of $15 on Ebay, so far they spent $1900 just to get me to switch. Now, they are probably making $50 or so on the phones they sold me, obviously, LG, Samsung and Apple are the ones making the money on the handsets, so that's $1900-$200 equals $1700 spent on me to have me as a customer. I pay for 5 lines $175 or so a month, so they need me to be at least 10 months of a paying subscriber to break even, in the mean time cost of maintaining the network and everything else that comes with keeping my service doesn't stop, and obviously, no contract, for me means that the moment someone offers me a better plan, or the chance to switch by paying the balance of my phones, I'm out. As a matter of fact, I live in Miami, Fl and I'm contemplating going back to Sprint (who's paying up to $350 per line to switch) to try the Spark thingy, other people I know tell me that there's a big difference once you get one of the Spark phones.