SoftBank sells T-Mobile shares at a 4 percent discount
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Back in July 2013, the battle between SoftBank and Dish Network over Sprint was won by SoftBank as the latter paid $21.6 billion for 78% of the company. Over time, SoftBank hiked its stake to 80% of Sprint and when T-Mobile closed on its purchase of Sprint on April 1st, SoftBank ended up with 304.6 million shares of T-Mobile.
Perhaps at a different time, SoftBank might have held on to the 24.7% of T-Mobile’s stock that it received following the merger. But the company has been having difficulties; during its most recent fiscal year SoftBank was drowning in $13 billion worth of red ink. Positions it held in WeWork and Uber produced disastrous results and SoftBank had even considered selling as much as $11.5 billion of its stake in Chinese tech firm Alibaba.
As part of the transaction, former Sprint CEO Marcelo Claure will purchase 5 million T-Mobile shares in a stock purchase that Claure will fund via a loan provided by SoftBank. Interestingly, Claure happens to be the current CEO of SoftBank Group International and is also a director on T-Mobile’s board. Not adding to its holdings in T-Mobile is Germany’s Deutsche Telekom. The latter owns a 43% stake in T-Mobile and some analysts expected it to add the additional 7% that would put it near the 50% mark. Instead, Deutsche Telekom has two options to purchase 101.5 million T-Mobile shares. If it exercises all of the options it has, the German telecom giant would own 51.8% of T-Mobile. Both options expire on June 22nd, 2024.
“133.5 million is going to the general investment public while the underwriters get a total of 10% to cover over-allotments.”
SoftBank is selling as many as 198 million T-Mobile shares or 65% of its stake via the carrier. 133.5 million is going to the general investment public while the underwriters get a total of 10% to cover over-allotments. Existing T-Mobile holders get a crack at 19.75 million shares and 30 million more are being sold to a public trust. The transaction had an interesting effect on T-Mobile’s stock price over the last few days with increasing volatility. Today, with most shares getting hit by coronavirus fears in several states, the broad market was taking it on the chin. But after early weakness, T-Mobile moved ahead for the day and closed at $108.43 for a gain of $1.27.
So what does the future hold for T-Mobile? With its cake-based 5G setup consisting of low-band 600MHz airwaves that travel great distances and penetrate buildings better than other signals; the 2.5GHz mid-band spectrum it acquired in the Sprint merger providing faster than expected 5G download speeds; and mmWave spectrum delivering zippy fast download data speeds, some believe that the carrier will end up as the fastest 5G wireless provider in the country. It is important to note that the number of T-Mobile shares outstanding will not increase due to the transaction which is actually positive for the carrier’s current stockholders.
A week from today, on July 1st, Dish Network will close on its purchase of Boost Mobile and 14MHz of 800MHz spectrum for $6 billion. Dish will then sign a seven-year MVNO agreement with T-Mobile that will allow it to offer wireless service while it builds a standalone 5G wireless network. The goal is to make Boost the nation’s new fourth-largest wireless carrier replacing Sprint which was swallowed up by T-Mobile. The Justice Department was concerned that reducing the number of major carriers by 25% would lead to higher prices for consumers.
The complex financial dealings happen to mark the end of the T-Mobile career of long time Chief Financial Officer Braxton Carter. The latter first became T-Mobile’s CFO back in 2005.
Questions & Answers
Q.Why is SoftBank selling such a large portion of its T-Mobile shares?
Why is SoftBank selling such a large portion of its T-Mobile shares?
SoftBank is facing financial difficulties, having reported $13 billion in losses during its most recent fiscal year. Poor results from investments in companies like WeWork and Uber have contributed to the need to raise funds.
Q.How will Marcelo Claure, who is both a SoftBank and T-Mobile executive, fund his purchase of T-Mobile shares?
How will Marcelo Claure, who is both a SoftBank and T-Mobile executive, fund his purchase of T-Mobile shares?
Marcelo Claure will finance his purchase of 5 million T-Mobile shares through a loan provided by SoftBank. He is the current CEO of SoftBank Group International and a director on T-Mobile's board.
Q.What is Deutsche Telekom's potential future stake in T-Mobile, given SoftBank's sale?
What is Deutsche Telekom's potential future stake in T-Mobile, given SoftBank's sale?
Deutsche Telekom currently owns 43% of T-Mobile and has options to purchase an additional 101.5 million shares. If all options are exercised, Deutsche Telekom could own 51.8% of T-Mobile by June 22nd, 2024.
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