Softbank looking for favourable exchange ratio, sources say; deal is on life support

Despite multiple reports to the contrary, the much-vaunted merger deal between Sprint and T-Mobile US is not yet dead, according to those in the know.

Softbank – Sprint’s parent company, whose board has reportedly nixed the deal due to an unwillingness to cede control of the combined entity – is holding out for Deutsche Telekom to meet its expectations on the exchange ratio for the transaction, Bloomberg reported late on Tuesday, citing unnamed sources.

Softbank expects T-Mobile US parent Deutsche Telekom to make its final proposal this week including the number of Sprint shares it is willing to accept in exchange for each T-Mobile US share, the newswire said.

Its sources claim Softbank is looking for fewer than eight Sprint shares per T-Mobile share, but based on Tuesday’s trading the exchange ratio is more than 9:1.

Through the past few months of speculation on the T-Mobile/Sprint tie-up, Bloomberg has consistently focused on the issues the parent companies faced agreeing on valuation.

However, when it reported on the collapse of the deal on Monday, Nikkei claimed the end of negotiations was triggered by Softbank’s unwillingness to cede control of the merged entity.

Indeed, Bloomberg’s sources said that irrespective of the exchange ratio, Softbank chairman Masayoshi Son has reservations about giving up control of Sprint. As such, the Japanese firm has been negotiating a way to give Son some decision-making power in the new entity, including appointing him as co-chairman.

According to Bloomberg, the deal is not dead, but it is on life support.