Sprint parent SoftBank made a decision to drop out of merger negotiations with Deutsche Telekom and combining T-Mobile with its own wireless carrier in the United States, Nikkei Asian Review reported on Monday, without citing specific sources. SoftBank's board reportedly decided to propose the ending of the consolidation talks over ownership structure issues and may approach the German telecom giant with the idea on as soon as tomorrow. Sprint parent supposedly went back on the idea of allowing Deutsche Telekom to hold a controlling stake in the merged entity or at the very least wasn't pleased with the proposed level of influence over the hypothetical firm it would have.
Last week's reports indicated that SoftBank was willing to not insist on leading the consolidated company in exchange for its founder and Chairman Masayoshi Son being appointed as the co-chair of its Board of Directors together with Deutsche Telekom CEO Tim Höttges. The two are said to have agreed on basic merger conditions last Wednesday and it remains unclear what prompted the sudden shift in opinion on SoftBank's part as the subject of ownership structure was presumably one of the first topics tackled as part of their months-long merger negotiations and should have been somewhat defined by now instead of becoming a reason for the talks to fall apart entirely. Immediately following Nikkei's Monday morning report, Sprint and T-Mobile stock declined by nine and five percentage points, respectively.
SoftBank's original plan for T-Mobile involved an outright acquisition of the wireless carrier circa 2013 but that move was effectively prevented by the former Obama administration which clearly signaled no such tie-ups will be allowed under its watch. While the current political leadership in the U.S. is more open to major mergers in all industry segments, Sprint and T-Mobile's performance changed in a drastic manner in the last four years and Deutsche Telekom reportedly isn't interested in selling its subsidiary any longer. Instead, the difference in their market caps would have allowed the German telecom company to organize an all-stock merger and provide SoftBank with a stake in the combined entity at a premium compared to how Sprint's shares are currently trading while still maintaining absolute control over the company that would be formed as a result of such a move. As SoftBank now appears to be dismissive of that scenario, it remains unclear how the new development will reflect on the performance of its subsidiary which is much more reliant on the widely reported merger than T-Mobile is, according to some analysts.