SoftBank Group Corp’s talks to merge US unit Sprint Corp with T-Mobile US Inc have hit a serious snag, according to people familiar with the matter, throwing the deal into jeopardy after months of talks.
In the past three days, the companies have been unable to get past differences over valuation, according to a person close to T-Mobile parent Deutsche Telekom AG, who asked not to be identified discussing private information.
Meanwhile, several members of SoftBank’s board have raised concerns about giving up control of the US wireless business, another person said.
Sprint and T-Mobile have discussed a merger for years with many fits and starts, and it was unclear whether the companies will ultimately return to the table, the people said.
The logic behind the deal has been that a combined company would be a stronger third player in the US wireless market and could use advanced 5G high-speed technology to deliver data and video service to compete with cable companies.
“It makes sense not to have just two with such big market share and two little ones,” SoftBank CEO Masayoshi Son said earlier in an interview on Bloomberg Television. “Three is a real fight, a real competition.”
Sprint shares sank 9.5 percent in New York trading, while T-Mobile fell 5.5 percent. SoftBank fell as much as 5.8 percent in Tokyo trading.
The companies had been ironing out final terms of the merger in the hopes of announcing a deal mid to late this month, people familiar with the matter told Bloomberg last month.
The Nikkei Shimbun on Monday reported that SoftBank would propose ending the talks as early as yesterday, citing the concerns about control of the combined entity.
While merger talks have been under way for months, SoftBank board members raised their concerns in the past few days, because it is now a make-or-break moment, with the sides very close to a deal, the person familiar with the matter said.
“SoftBank’s shares have climbed until now largely on expectations for the merger, so a negative reaction is to be expected,” Iwai Cosmo Securities Co analyst Tomoaki Kawasaki said.
Deutsche Telekom and T-Mobile declined to comment. Sprint and SoftBank representatives did not immediately reply to requests for comment.
Investors have cheered on a combination of T-Mobile, the third-largest US wireless carrier, with No. 4 Sprint as a way to cut costs and forge a bigger competitor to take on AT&T Inc and Verizon Communications Inc.
Without the merger, the industry could return to the intense price wars that have put pressure on profits for all four major carriers — to the delight of consumers, who have gotten heavy phone discounts and unlimited data service.
A deal between Overland Park, Kansas-based Sprint and Bellevue, Washington-based T-Mobile would be certain to attract heavy scrutiny from regulators, as it would reduce the four largest carriers in the country to three.
Under former US president Barack Obama’s administration, officials fended off a previous attempt by SoftBank to merge Sprint with T-Mobile.
The companies had been hoping their chances would improve under the more business-friendly administration of US President Donald Trump.
Bonn, Germany-based Deutsche Telekom has maintained throughout the talks this year with SoftBank that it should maintain control of the combined company.
Tokyo-based SoftBank had been willing to accept a stock-for-stock merger that valued Sprint at or near its market price, with no premium, people familiar with the matter said last month.
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