SoftBank In Talks To Sell T-Mobile Shares As It Looks To Raise Funds For Buyback: Report

SoftBank Group Corporation SFTBY is looking to sell a "significant portion" of its T-Mobile Us Inc. TMUS shares to majority stakeholder Deutsche Telekom AG DTEGY, the Wall Street Journal reported Monday.

What Happened

The Japanese investment firm holds more than 24% of the stake in T-Mobile following the mobile network operator's merger with its subsidiary Sprint Corporation in April.

Deutsche Telekom holds more than 43% of the stake in T-Mobile following the merger and has voting control of the company.

According to the Journal, the two companies are discussing the size of such a deal, which is likely to bring Deutsche Telekom's share of the mobile network above the 50% mark.

The German telecom is likely to buy the shares at a discount, as is typical in such deals, the Journal noted.

The talks are in early stages and could still fall apart, people familiar with the matter told Journal. If an agreement is reached, it will also require relaxing of shares lockup provisions that the two companies had agreed to as part of the merger deal.

Deutsche Telekom Chief Executive Officer Tim Höttges didn't confirm the talks to the Journal, but said that T-Mobile was a "great business to have" with "big, attractive opportunities going forward."

Why It Matters

SoftBank has been struggling for the past few quarters, with a lot of its ambitious bets on technology startups like WeWork, Uber Technologies Inc. UBER, and Oyo Hotels making losses.

Activist investor Elliott Management Corp. increased its stake in the veteran Japanese investor earlier this year and pushed for reforms.

SoftBank announced its board of directors had approved a $41 billion share buyback program in March. The investment firm on Monday (Tokyo time) said it was looking to repurchase shares worth $4.7 billion by March 2021, making it no surprise that it is looking to raise funds.

Price Action

SoftBank shares closed 1% lower at $21.16 in the otc market on Friday. Deutsche Telekom shares closed 0.13% lower at $14.82 the same day.