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Deutsche Telekom and SoftBank walk into a room with T-Mobile…INTL

Deutsche Telekom and SoftBank walk into a room with T-Mobile…

…and come out with a quid-pro-quo. Deutsche Telekom (DTE), the largest telecommunications provider in Europe, has been playing hardball with startup-investor SoftBank to acquire the Japanese investment firm’s stake in the US-based cellphone network T-Mobile (TMUS).

On Tuesday, Deutsche Telekom and Softbank agreed to a share-swap deal. Since T-Mobile is still technically publicly-traded, the acquisition will be done through the markets. The German telecom giant will buy 65 million T-Mobile shares for a price of $109/share, while (in return) Softbank will receive cash and a 4.5% stake in Deutsche Telekom. The transaction value for the deal is estimated at $7b and will bring Deutsche Telekom’s stake in T-Mobile to 48.4%.

For Deutsche, the deal strengthens the group’s hold in the US while bringing a seasoned partner like Softbank to the table. The two have already started strategizing on how SoftBank’s diverse portfolio could benefit from Deutsche’s customer base.

why it matters

SoftBank’s shares were down by a staggering 50% in March 2020 as its debt burdens and risky investments took a toll on the company. Since news of the share-swap, SoftBank shares rose by almost 10%, while Deutsche’s shares were up by 0.4% by time of market close yesterday.