Japan’s SoftBank Group Corp is considering giving control of Sprint Corp to Deutsche Telekom AG’s T-Mobile US Inc to clinch a merger of the two U.S. wireless carriers, according to people familiar with the matter.
SoftBank has not yet approached Deutsche Telekom to discuss any deal because the U.S. Federal Communications Commission has imposed strict anti-collusion rules that ban discussions between rivals during an ongoing auction of airwaves.
After the auction ends in April, the two parties are expected to begin negotiations, the sources told Reuters this week.
Two and a half years ago, SoftBank abandoned talks to acquire T-Mobile for Sprint amid opposition from U.S. antitrust regulators. That deal would have put SoftBank in control of the merged company, with Deutsche Telekom becoming a minority shareholder.
T-Mobile was worth around $30 billion at the time, but its market value has since risen to more than $50 billion as it overtook Sprint as the No. 3 wireless carrier by subscribers. Sprint’s market value is around $36 billion, roughly the same as in 2014.
Deutsche Telekom Chief Executive Tim Hoettges has said in recent months that the German company is no longer willing to part with T-Mobile, prompting SoftBank to explore a new strategy towards a potential combination, the people said. Deutsche Telekom owns about 65 percent of T-Mobile.
SoftBank, which owns about 83 percent of Sprint, has been frustrated with its inability to grow significantly on its own in the U.S market, which is dominated by Verizon Communications Inc (VZ.N) and AT&T Inc (T.N), the two largest U.S. carriers.
While SoftBank is still open to discussing other options, it is now willing to surrender control of Sprint and retain a minority stake in a merger with T-Mobile, the sources said. They asked not to be identified because the deliberations are confidential.
Investors have said a merger between T-Mobile and Sprint, ranked third and fourth respectively, would still face antitrust challenges, but made strategic sense as the industry moves to fifth-generation wireless technology.
Carriers will need to spend billions of dollars to upgrade to 5G networks that promise to be 10 times to 100 times faster than current speeds.