Sprint for sale? Japanese owner exploring merger deal options

Sprint’s parent company is “open for many options” that include being a seller, Sprint chairman and SoftBank CEO Masayoshi Son said.
Sprint’s parent company is “open for many options” that include being a seller, Sprint chairman and SoftBank CEO Masayoshi Son said. File photo by Bloomberg News

Sprint’s owner all but hung a “For Sale” sign on the Overland Park-based wireless carrier Wednesday.

The news came out of Tokyo, early in the day and directly from Sprint’s chairman Masayoshi Son, who also is chief executive of SoftBank Group Corp. that owns more than 80 percent of Sprint’s stock.

It marked a stunning turnabout from widespread expectations that Sprint would try again to buy rival T-Mobile after its failed attempt in 2014. Son allowed that a bid for T-Mobile may yet happen, or Sprint could end up cutting a deal with some other company altogether.

“Now, we may buy, we may sell, maybe (a) simple merger,” Son said, according to an interpreter’s version of his remarks during SoftBank’s quarterly meeting with analysts and investors .

“There are so many options available, and we are looking into that. We are open for any options,” Son said. “We may be dealing with T-Mobile. We may be dealing with a totally different company.”

Kansas City has a big stake in the direction Son takes, namely jobs.

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A merger with T-Mobile could put many of Sprint’s roughly 6,000 headquarters jobs in jeopardy as the two rivals would eliminate duplicate posts in a merger.

Alternatively, selling Sprint could strip Kansas City of the company’s headquarters, although even that may depend on who the buyer was.

And there would be bidders.

“There’s no doubt that someone would want to buy Sprint,” said Berge Ayvazian, an industry analyst at Wireless 20/20 .

Logical bidders would include cable giants Comcast and Charter and satellite television operator Dish Network.

Both cable giants want to add wireless services to the bundle of television, broadband and traditional fixed telephone services that they currently offer customers. Buying Sprint would allow them to complete that “quad play” of services.

Dish, for its part, already owns a lot of licenses for wireless spectrum that carries data and voice traffic from cellular towers to mobile phones. But Dish has no network on which to use that spectrum to provide wireless services to consumers and businesses.

Who buys Sprint is almost as important as whether it gets sold, especially in the jobs market.

Ayvazian said Comcast is close to offering its own wireless service, in part by using an agreement it has to provide coverage using Verizon’s network. And that progress, Ayvazian said, means Philadelphia-based Comcast likely would want Sprint’s headquarters to move East.

Charter, based in St. Louis, has no wireless offering waiting in the wings and may need to keep Sprint much more intact, he said.

One problem SoftBank might encounter is that any potential bidder for Sprint likely would be more interested in T-Mobile. T-Mobile has more customers than Sprint. It has been growing faster than Sprint. It’s financially stronger than Sprint, and many analysts believe T-Mobile is poised to start pocketing much more cash from its growing customer base.

Speculation about these and other combinations have circled throughout Wall Street since Donald Trump’s surprising election victory in November. Trump is seen as much more likely to accept mergers than former President Barack Obama had been.

Son attracted attention in December when he visited Trump Tower for a meeting with then-President-elect Trump. He promised to invest $50 billion and create 50,000 jobs in the United States on the basis of Trump’s promise to reduce regulations here. Sprint subsequently said it would provide 5,000 of those jobs.

The visit and promise were widely seen as a preamble to a new SoftBank bid for T-Mobile once Trump took office.

That doesn’t mean the Trump administration would approve a Sprint/T-Mobile merger, and some analysts don’t think it would.

And that made Son’s acknowledgment Wednesday that Sprint could end up being sold or merged into another business all the more meaningful.

“While general sentiment has focused on Sprint’s potential position as an acquirer, intriguingly SoftBank seems willing to embrace multiple avenues for possible value creation, including a merger or even a willingness to take a back seat to another acquirer,” Barclays analyst Amir Rozwadowski wrote in a note to clients Wednesday.

In December, Rozwadowski outlined several reasons why SoftBank may need to consider alternatives to bidding for T-Mobile. A Sprint/T-Mobile deal was no “layup,” he concluded.

In addition to regulatory concerns, both companies have ample debt, and that makes raising more money to finance a buyout of either one that much more difficult.

T-Mobile’s principal owner, Germany-based Deutsche Telekom, may not want to own stock in the merged businesses and had tried to sell T-Mobile to AT&T years ago. This means SoftBank could need to raise perhaps $54 billion in cash to buy T-Mobile, according to a November analysis by BTIG Research analyst Walter Piecyk.

An effort to sell Sprint would not be Son’s first try.

SoftBank bought Sprint in 2013, and Son began a campaign to persuade Washington regulators to let it buy T-Mobile, too.

Regulators blocked that path, and Son said he lost faith, then failed in his attempts to sell Sprint. No one wanted to buy Sprint then because of its weak financial and competitive position.

Sprint’s turnaround now is in hand, Son said, allowing him to broaden SoftBank’s options to include selling Sprint and looking beyond a straight T-Mobile deal.

He also said Sprint could remain a standalone wireless operator in the United States because of the gains it has made since its failed push to acquire T-Mobile. Perceptions, he said, have not caught up with the reality that Sprint is no longer “a bottleneck” for SoftBank.

Wells Fargo Securities analyst Jennifer Fritzsche said Son’s comments stirred questions from investors, particularly whether Sprint would be a seller.

“We don’t know the answer, but it is hard for us to see SoftBank taking a minority position in a combined entity given (that) the momentum in Sprint is only just being seen,” Fritzsche wrote in a note to clients Wednesday.

Son’s comments come as wireless industry analysts have speculated about Sprint making another run at T-Mobile as well as many other possible mergers. Potential deals, according to analysts, also could involve a cable company such as Comcast or Charter buying T-Mobile, Sprint or Dish Network.

Sprint’s chief financial officer also recently said that a merger of the smaller U.S. companies may be necessary to compete with the two largest wireless companies, Verizon and AT&T.

Mark Davis: 816-234-4372, @mdkcstar

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