U.S. telecommunications company Sprint is believed to have lined up eight banks to raise $40 billion to acquire T-Mobile.
Sprint and T-Mobile are the smaller of the top four wireless telecommunication providers in the U.S. A merger between these two companies will form an entity that may give stiff competition to Verizon and AT&T.
A Reuters report cites people familiar with the matter and suggests that Sprint has shaken hands with eight banks to raise $40 billion for the T-Mobile acquisition. Well-known global banks, which include Goldman Sachs Group, JP Morgan Chase, Deutsche Bank, Citigroup and Bank of America Merrill Lynch have agreed to finance the proposed acquisition.
Softbank, that owns majority of the stakes in Sprint, is also said to have approached Japanese banks Mizuho Financial Group, Sumitomo Mitsui Financial Group and Bank of Tokyo-Mitsubishi who are also in agreement to finance T-Mobile's acquisition.
An earlier report disclosed the agreement between Softbank and Deutsche Telekom AG, owner of T-Mobile, on a deal with broad terms. For the said deal, Sprint will pay $40 a share of T-Mobile giving the uncarrier a valuation of of roughly $32 billion. In the event that Deutsche Telekom will try to breakup, it will be required to pay around a billion dollars to do so. Softbak will have to face the same music for $2 billion if the transaction is blocked by regulators.
Analysts believe that even though Sprint has arranged necessary funding required to acquire T-Mobile, the company is still to cross the biggest hurdle faced from the U.S. Federal Communications Commission (FCC) and Department of Justice (DOJ). Both the government agencies had previously indicated that they want to have at least two more competitors in the market competing with AT&T and Verizon.
AT&T tried to acquire T-Mobile but the proposed deal was rejected by the FCC. However, some market observers believe that as Sprint and T-Mobile are the smaller of the top four carriers in the U.S., market regulators may agree with the merger.
The U.S. telecommunication industry may see several changes in the near term. AT&T has already put forward a proposal to purchase satellite company DirecTV and cable operator Comcast is attempting to merge with rival Time Warner Cable. Government agencies like FCC and the DOJ will have a busy time ahead for going through all merger and acquisition proposals.
With the financial aspect of the deal sorted out, Sprint has moved one step closer to acquire T-Mobile. If FCC agrees then the merger can be settled as early as August this year.
