Sprint is one step closer to acquiring T-Mobile in a bid worth $40 billion with the help of eight major banks that are willing to provide hefty financing, according to Reuters.
An exclusive report from Reuters, citing people familiar with the matter, has revealed that Sprint has convinced eight major banks to finance its proposed deal to acquire T-Mobile and end the war between the third and fourth largest mobile carriers in the United States. If all goes well, the plan will challenge Verizon and AT&T, the current leaders in the U.S. wireless industry.
The deal will be backed by some major banks around the world, including SoftBank, which owns a majority stake in Sprint. SoftBank is willing to offer a bridge loan of $20 billion and an additional $20 billion will be raised to cover the outstanding funds, which also include T-Mobile's current debt of about $9 billion.
Other banks that have agreed to help Sprint with acquisition bid include JPMorgan Chase & Co, Goldman Sachs Group, Deutsche Bank AG, Bank of America Merrill Lynch, Citigroup, Mizuho Financial Group, Bank of Tokyo-Mitsubishi UFJ and Sumitomo Mitsui Financial Group.
For Sprint, there will be some challenging regulatory hurdles to overcome till the deal is finalized. Also, if the merger falls apart due to regulatory issues, SoftBank will have to pay $2 billion to Deutsche Telekom. Deutsche Telekom is also obliged to pay $1 billion if it backs out of the deal, said a person familiar with the matter.
AT&T failed in its earlier bid to acquire T-Mobile three years ago after regulators rejected the carrier's $39 billion offering. As a result, AT&T paid Deutsche Telekom a reverse-break up fee of $6 billion in cash and U.S. mobile assets. Even if Sprint's deal goes through, Deutsche Telekom is expected to keep a stake of 15 percent or more in the company, sources added.
T-Mobile's first quarter earnings report revealed it had 49.1 million customers. The national carrier has managed to attract a massive audience with its reasonable Uncarrier plans, adding 2.4 million network subscribers since the first quarter last year. And the company recently announced a new "Test Drive" option that will allow customers to try the network for seven days before permanently switching.
Sprint, on the other hand, has been losing its hold in the market. The company recently reported it lost 231,000 postpaid subscribers in Q1 and 383,000 in total. But it still serves 53 million subscribers.
