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SoftBank CEO running out of time to clinch Sprint-T-Mobile merger


By Sheila Dang and O'Donnell

(Reuters) - Group Corp <9984.T> CEO faces a closing window of opportunity to merge the Japanese company's debt-laden U.S. with Deutsche Telekom's U.S. wireless unit, U.S. Inc .

Sprint's latest round of merger talks with T-Mobile, reported earlier this week, came just five months after their previous deal negotiations ended. This is the companies' third attempt to clinch a deal in the last four years.

While the time window for a deal is not clearly defined, the companies need to act before a U.S. in November. Sprint's and SoftBank's deteriorating finances and the 2020 U.S. also make it unlikely they will get another chance, sources close to the negotiations and analysts said.

"The view is, if they are going to pursue a merger, now is the time," said. "can help them turn around the network."

controls Sprint through its 85 percent stake. Son pulled out of merger talks with in November after he changed his mind on the valuation he would accept. His willingness to entertain a deal again led to the negotiations restarting, sources have said.

Sprint is saddled with long-term debt of more than $32 billion and has also signalled that its capital investment is going to double, as it seeks to build to compete against T-Mobile, and Inc . Analysts have warned Sprint will struggle to handle this burden on its own unless it cuts a deal with soon.

"With a significant step-up in their network capex of an incremental $1.5 billion to $2.5 billion year-on-year beginning in fiscal 2018, it is hard to see Sprint coming close to free cash flow breakeven, much less cash flow positive, in the foreseeable future," wrote in a note.

A Sprint declined to comment on whether the company was under time pressure to complete a merger with and did not immediately respond to requests for comment.

has its own mounting financial constraints following a string of acquisitions and needs to pay down debt, which reached 15.8 trillion yen ($147 billion) as of the end of December. It has said it is planning to raise cash by taking its Japanese mobile phone unit public this year.

The has tentatively scheduled its next spectrum auction for November. If either Sprint or registered to participate in the auction, they would be barred from merger talks until the auction results are disclosed, Moffett said. The previous spectrum auction put deal discussions on ice for about a year.

If Sprint waits longer, the regulatory environment could become more hostile to a deal than it is currently. The has filed a lawsuit to block AT&T's $85 billion deal to acquire U.S. company over concerns over the pricing power of the combined company.

Sprint's and T-Mobile's first round of talks was abandoned in 2014 after the expressed concerns about prices for rising should the No. 3 and No.4 market players combine.

Any proposed deal would take at least a year for regulatory approval, raising the question of how the next little more than two years away would affect a merger, said.

Sprint and would be better off attempting a merger under the current rather than risk the odds of a in 2020, Entner added.

(Reporting by and O'Donnell in New York; Editing by and Cynthia Osterman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, April 12 2018. 05:47 IST