SoftBank Is In Big Trouble If Sprint/T-Mobile Merger Doesn’t Happen

U.S. Department of Justice Begins Examining How the Proposed T-Mobile & Sprint Merger Will Have Impact in Smaller Wireless Operators

This is not investment advice. The author has no position in any of the stocks mentioned. has a disclosure and ethics policy.

Japanese investment bank SoftBank has a total of $19 billion invested into the #4 U.S. telecom company, Sprint (NYSE:S).

SoftBank is well known for its $100B vision fund, that funnels large amounts of money from different funds, the largest of which comes from Saudi Arabia, and its multitude of investments in tech and communications.

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T-Mobile offer to purchase Sprint getting cloudier as the deal is delayed again

April 29th was the original deadline for regulators to give the deal the green light, but with just a few days left to go the companies extended the expiration of the deal to July 29th. This might just be an administrative move, but as more and more weeks go by without an indication from either the U.S. Justice Department or the FCC, some analysts are saying the chance for the deal to fall apart is as high as 80 percent.

T-mobile's (NASDAQ:TMUS) parent Deutsche Telekom AG was the lone bidder seriously attempting to acquire Sprint and its assets, including some very valuable midrange frequencies that will be key to a large-scale 5G deployment.  T-Mobile has offered $26.5 billion for the company, and should this deal fall apart, it's not clear exactly who would step in to buy Sprint.

Keep in mind Sprint has estimated to have lost around $25 billion in the last 10 years. Their balance sheet is even more dismal: in 2016 Sprint's debt load totaled $32.3B, by 2018 this figure had soared to $39.3B as the carrier had resorted to steep price discounts to stop the exodus of subscribers the firm was witnessing in 2015-2016.

SoftBank owns 84 percent of Sprint

For most intents and purposes, SoftBank owns Sprint. The Japanese firm owns 84 percent of the company, and should things fall through with the T-Mobile merger, SoftBank CEO Masayoshi Son will be in a very rough spot.

SoftBank would most likely be forced to either step in and save Sprint with a large injection of funds to be used to modernize Sprint's aging network, or it could sell off Sprint's assets which wouldn't come close to recompensating $19 billion dollars.

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It seems as though SoftBank's strategy has shifted. A decade ago it was all about telecom. Now, the firm is laser-focused on its VisionFund and the oft-talked about Vision Fund 2.  Son has even directed his company to begin selling off interests in wireless carrier operations in the firm's home market of Japan. If they can successfully off-load Sprint to T-Mobile then they would have completed a massive pivot away from physical telecom and communications companies to tech startups such as Uber, FLipKart, SoFi and others.

However, should U.S. regulators stand in the way of getting done, Softbank will be sitting with a company nearly no one wants, who operates a soon-to-be-outdated network, and that owes somewhere around $40 billion dollar

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