Analyst: New Street Research
New Street Research’s Jonathan Chaplin was understandably caught up in last week’s merger mania news. “We made the mistake of reacting to the first two press articles on a Sprint/T-Mobile deal, and so now we are expected to respond to all of them,” Chaplin said. “The latest report from Bloomberg suggests that the parties are close to an all-stock deal, at market. This is a far simpler structure than all the others that have been contemplated; it fits with our view that none of the parties will sign a bad deal; but, it only makes sense if Masa (SoftBank CEO Masayoshi Son) is willing to relinquish control at this price,” he said.
New Street analysts had been getting the sense that Son would not relinquish control without receiving appropriate value for unused 2.5 GHz spectrum. In a situation where the real prize is $44BN in synergy value, and both sides are required to compromise in order to capture the prize, it is difficult to know where things will end up, New Street analysts posited.
“We are absolutely certain that it would be a travesty if one side walked away from value of this magnitude,” Chaplin said, “just because they didn’t get everything they wanted.”
There is no alternative opportunity of greater value that is immediately available to either DT or Softbank, and there is certainly no greater opportunity available to the shareholders of Sprint and T-Mobile, according to New Street analysts.
“We have no insight as to whether this structure is more likely than the ones we contemplated at the end of last week,” Chaplin said “which would see more value going to Sprint. We would greatly appreciate it if our good friends at the WSJ, Bloomberg, Reuters and CNBC would consider a three-day moratorium on all further reporting on this deal so that we can catch our breath, and write about other things,” he concluded.
September 26, 2017
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