Banks ‘to pay $23bn’ to get T-Mobile/Sprint merger done

Banks ‘to pay $23bn’ to get T-Mobile/Sprint merger done today

01 April 2020 | Alan Burkitt-Gray

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The long -awaited merger of T-Mobile US and Sprint is likely to go ahead on schedule today – but banks will need to provide $23 billion worth of loans to allow it to happen.

Banks had been planning to sell the debt to investors, but the coronavirus pandemic means they were unable to carry out their roadshows.

T-Mobile said a week ago that it was “financially prepared to close its planned merger with Sprint”. It said it had been in touch with all 16 banks that are funding the deal.

What it didn’t say was that those 16 banks wanted to sell on the debt – just as the backers of last month’s acquisition of Zayo by EQT and Digital Colony did manage to win over investors. In fact, the two buyers of Zayo were heavily oversubscribed.

Marc Ganzi, CEO of Digital Colony, told Capacity last month in an interview that will be published in full shortly, “timing in life is everything”. But Ganzi thought that Braxton Carter, the CFO of T-Mobile, was on time to raise the needed $23 billion.

Now the shutdown means instead of going to outside investors for the money, the banks will have to provide the funds from their own resources, at a time when they are already hard-pressed.

Bloomberg said: “It’s the largest acquisition financing deal to get stuck on banks’ balance sheets since the 2008 financial crisis.”

It listed six banks of the 16 that are most exposed: Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and Royal Bank of Canada.

Among immediate changes the industry will see when the merger is completed are the consolidation of the two companies’ 5G investment. And, according to Capacity’s sources, Sprint’s wholesale division will adopt the T-Mobile brand, but the unit will not be folded into Deutsche Telekom Global Carrier.

Deutsche Telekom, with the biggest stake in T-Mobile US, will acquire a powerful role as the dominant shareholder in the third biggest mobile carrier in the US. When the merger was agreed two years ago SoftBank, the controlling shareholder in Sprint, said it would grant Deutsche Telecom a proxy for all its shares in the merged T-Mobile.

The deal means the combined company will do business as T-Mobile US, and the Sprint name will vanish from the industry.

Mike Sievert (pictured), currently COO of T-Mobile US, will become CEO of the enlarged operation on 1 May, replacing John Legere, who is stepping down.