By Drew FitzGerald and Cara Lombardo 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 18, 2020).

SoftBank Group Corp. is in talks to sell a significant portion of its T-Mobile US Inc. stake to controlling shareholder Deutsche Telekom AG as the Japanese technology conglomerate scrambles to raise funds.

The transaction, if completed, would boost Deutsche Telekom's nearly-44% stake in T-Mobile above 50%, according to people familiar with the matter. The German company already has voting control of the U.S. mobile-phone giant under a prior agreement with SoftBank, which recently held almost 25% of T-Mobile's common stock, according to FactSet.

The size of any purchase is still being discussed but it would likely be significant: T-Mobile's market value stands at about $120 billion.

Details of the discussions couldn't be learned but Deutsche Telekom would likely buy the shares at a slight discount, as is typical for a transaction of this type.

A deal isn't guaranteed and the talks could still fall apart, the people cautioned.

T-Mobile took its current form on April 1 after it absorbed Sprint Corp., a SoftBank-controlled business that struggled for years to defend its customer base against competition from rivals. By combining the third- and fourth-biggest players, the merger consolidated the U.S. wireless sector into a market dominated by three national networks.

SoftBank is expected to retain rights to 48.8 million shares it surrendered to complete the merger that will be reissued if T-Mobile's stock price reaches certain milestones within two years, one of the people familiar with the matter said.

SoftBank is seeking to sell assets and improve its performance after suffering big investment losses and coming under pressure from activist investor Elliott Management Corp. SoftBank Chairman Masayoshi Son in March said his company would aim to sell $41 billion of assets to boost its liquidity and help fund a big new stock-buyback program. The company was expected to look at a number of holdings, including T-Mobile, to help fund the buyback.

The new stock sale under discussion would allow SoftBank to cash out some of its bet on Sprint, a holding that recently turned into a rare bright spot for the Japanese conglomerate. Many other SoftBank investments -- some through its giant Vision Fund -- including WeWork, ride-hailing service Uber Technologies Inc. and Oyo Hotels & Homes Pvt. Ltd., operate in sectors particularly hard-hit by the coronavirus crisis.

SoftBank and Deutsche Telekom had agreed to lockup provisions that prevent SoftBank from selling most of its position in T-Mobile over the next four years, with exceptions for small divestitures. Those rules would likely be tweaked to allow for the stock sale under discussion.

Deutsche Telekom on Friday reported that its first-quarter revenue and profit both increased despite the early effects of the coronavirus pandemic on its operations. Asked whether the German company had the balance-sheet strength to buy more T-Mobile shares, Chief Executive Tim Höttges declined to comment but called the U.S. carrier "a great business to have" with "big, attractive opportunities going forward."

--Phred Dvorak contributed to this article.

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

 

(END) Dow Jones Newswires

May 18, 2020 02:47 ET (06:47 GMT)

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