SoftBank to raise over $19 bn in bonds to fund T-Mobile deal

Japanese telecom services provider SoftBank is expected to tap the US bond market to raise over ¥2 trillion ($19 billion) needed for the acquisition of fourth-ranked American wireless carrier T-Mobile US, according to the Japanes business news daily Nikkei.

The Japanese telecommunications firm intends letting US subsidiary Sprint, which it acquired in July this year, issue the bonds so that SoftBank would retain the financial strength to conduct additional mergers and acquisitions, according to a senior SoftBank official.

The US telecom company could first borrow thw money for the acquisition and then convert that debt by issuing straight bonds. According to plans, Sprint would buy a majority stake in T-Mobile from the company's German parent, Deutsche Telekom.

SoftBank is looking to holding 60-70 per cent of the shares in the entity that would result from the Sprint - T-Mobile integration.

Sprint had a negative free cash flow of $22.4 billion for the January-September period, in part due to capital investment, and with its interest-bearing debt in excess of $30 billion, the company had a speculative-grade credit rating of BB- from Standard & Poor's.

While Sprint is majority owned by Softbank, T-Mobile is majority owned by Deutsche Telekom.

According to an earlier report in The Wall Street Journal, this month, Sprint was studying regulatory concerns about such a deal and was likely to make an offer for T-Mobile in the first half of next year.

According to the the Nikkei report, the parent companies of Sprint and T-Mobile were conducting talks that were in the final stages, for a possible deal. Nikkei said  SoftBank might make its offer as early as spring 2014, which matched the earlier report on timing.

A $19-billion price tag for T-Mobile would nearly equal the $21.6-billion that SoftBank paid for 78 per cent of Sprint earlier this year. The Sprint-T-Mobile combination would create a carrier with a customer base of nearly 100 million, close to subscriber parity with AT&T and Verizon Wireless, each having over 100 million. However, US regulators, may be expected to block a deal of the type in order to preserve competition in the nation's wireless industry.

In a precedent of the kind, the government shot down AT&T's proposed takeover of T-Mobile in 2011, with some regulators citing the need to keep four major rivals in the market.