Reports: Sprint set for $32B T-Mobile US offer

Published reports, citing inside sources, claim Sprint is on the verge of putting in a $32 billion offer to acquire smaller rival T-Mobile US.
Several sources claim the deal will include an offer of $40 per share, or roughly a 17% premium over T-Mobile US’ closing price on Wednesday. The offer would be coming from Sprint owner Softbank, which is controlled by its Chairman Masayoshi Son, with a majority of the offer going to T-Mobile US parent company Deutsche Telekom, which owns roughly 70% of the operations.
Reports surfaced last week that DT had indeed accepted an offer from Softbank for its stake in T-Mobile US.
Analysts seemed to think that rumored amount was on the low side, noting that something closer to $50 per share would seem more reasonable. In 2011, the federal government rejected AT&T’s planned $39 billion acquisition of T-Mobile US – which was approved by DT – citing competitive concerns.
Sprint and T-Mobile US have hinted that they would be open to such a merger, with Son taking his case to public venues over the past several months.
Beyond the financial situation, a bigger challenge for the deal would appear to be regulatory hurdles. The Federal Communications Commission has hinted that it was happy with the current layout of four nationwide operators, and earlier this week noted in rulemaking for the upcoming 600 MHz incentive auction and updated spectrum screen that any disruption to the current status quo would result in re-visiting of those rules.
Sprint and T-Mobile US are both currently eligible to bid on all of the licenses expected to be available in the planned 600 MHz spectrum auction, with operators controlling substantial spectrum below 1 GHz, including rivals AT&T Mobility and Verizon Wireless, being prevented from bidding on a portion of that spectrum. Both Sprint and T-Mobile US were very vocal in lobbying the FCC on such rules in an attempt, they say, to prevent those operators from gaining more control over very-valuable sub-1 GHz spectrum licenses.
The FCC’s recent spectrum screen changes could also prove difficult to overcome. The FCC said it would count up to 101 megahertz of spectrum from the broadband radio service and educational broadband service bands (2.5 GHz), which Sprint controls as much as 150 megahertz of in some markets. Combined with its spectrum holdings in the 800 MHz and 1.9 GHz bands, along with T-Mobile US’ substantial holdings in the 700 MHz, 1.7/2.1 GHz and 1.9 GHz band, would seem to present a carrier holding a substantial portion of wireless spectrum.
Analysts have hinted that Sprint could look to divest some of its 2.5 GHz spectrum holdings in a move that would allow it to still hold a substantial amount in that band to feed its Spark initiative, but spread the rest of those holdings around to rivals. The 2.5 GHz band is looked at by many as a great source for adding capacity to a network. Prior to being fully acquired by Sprint last year, Clearwire had attempted to sell off some of its 2.5 GHz spectrum holdings in an attempt to bolster its rapidly deflating coffers, with reports that Verizon Wireless was one potential suitor.
The FCC last month laid out initial spectrum screen update rules, noting it would look more closely at mergers and acquisition involving spectrum holdings below 1 GHz as well as increase the spectrum bands included in the screening process. Those rules were tied to initial 600 MHz auction rules that will limit participation of some carriers and plans to not limit bidding in the AWS-3 auction.
Sprint had been lobbying the FCC to curb the inclusion of the 2.5 GHz spectrum band, arguing that those assets were far removed from the sub-1 GHz band and thus should not be treated in the same screening process. The FCC had previously counted just 55 megahertz in the 2.5 GHz band towards its screening process.
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