T-Mobile owner Deutsche Telekom stock up after Sprint merger talk

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Sprint was in need to get bigger to survive and Masayoshi Son, the Japanese telecommunications mogul, was well aware of it. The reason is clear. Sprint, controlled by Mr. Son’s SoftBank, has long lagged behind the two titans of American wireless, Verizon and AT&T, each of which has more subscribers than Sprint and T-Mobile combined.
Today we know that the convoluted deal has involved SoftBank forming a new company by acquiring both Sprint and Charter. The Japanese company now own a majority of the new entity, even though Sprint’s market value, at $34 billion, represents roughly a third of Charter’s $99 billion. The closing of the deal made the T-Mobile owner Deutsche Telekom AG shares rose to the top of the EuroStoxx 50 this morning.

Deutsche Telekom shares were up 0.79% to €15.88 today at 9:30 CEST, sending it to the top of Germany’s Dax and outpacing the 0.18% increase for the benchmark, but had pared gains by 11am up just 0.35%. 
Sprint is said to have resumed preliminary talks about a merger with T-Mobile owner Deutsche Telekom. Bloomberg reported today, citing people familiar with the matter, as Sprint attempts to deal with increased competition in the U.S. wireless market.
Softbank’s Sprint reportedly started talks after its exclusive negotiating period with Comcast Corp. and Charter Communications expired at the end of July, the sources said.

Softbank has been considering a bid for Charter Communications. “We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint,” Charter said in a statement July 30, rejecting SoftBank’s offer. Originally Charter has expressed little interest in any deal with Sprint. The cable operator said the last week week that it had no interest in buying Sprint (though Mr. Son envisions a different kind of deal).

The emergence of the potential bid for Charter is the latest deal-making wrinkle that SoftBank has weighed for Sprint over the past five years. Mr. Son first bought control of the embattled wireless company in 2013 for nearly $22 billion, and then quickly embarked on a pursuit of T-Mobile. Those talks ended in 2014, having drawn strong opposition from the Obama administration.

Further talks with T-Mobile owner Deutsche Telekom have been suspended. T-Mobile’s reversal in fortunes has made it bigger by market value than Sprint, putting Mr. Son at a disadvantage in negotiations.
But Sprint has had talks with Charter and Comcast to offer wireless services to their cable and high-speed internet customers.

During a quarterly earnings call the last week, Sprint’s chief executive, Marcelo Claure, said that a final announcement about any deal “should be coming in the near future.” He did not elaborate.
Mr. Claure said that his primary job was to improve Sprint’s health as a stand-alone company. That progress has been slow, but has shown results: The telecom company reported $206 million in profit in the second quarter, the first such profit in three years. Much of that came from an expansive cost-cutting program that has shed nearly $4 billion over the past two years.

But Sprint still lost 39,000 consumers on traditional contracts in the quarter, despite offering a full year of unlimited data to new subscribers. The company’s main rivals all reported strong gains in new customers for the quarter.

Softbank took control of Sprint in 2013. Softbank shares gained in afternoon trading in Tokyo Monday, after it unveiled better-than-expected earnings for the three months ended in June.
Softbank reported operating profit of ¥479.3 billion ($4.3 billion) for the first quarter, beating analysts projection of ¥323.7 billion. Sales came in at ¥2.19 trillion.

Sprint was one of the company’s bright spots, with revenue up 4% to ¥910 billion in the first quarter.
Softbank shares gained 2.38% to close at ¥9,023 Monday, the biggest rise in more than a month and extending a three-month gain of 6.43%.

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