Japanese telecoms operator Softbank has confirmed it is exploring options to offload its stake in T-Mobile US as COVID-19 weighs very heavily on other investments.
As it stands, Softbank currently owns approximately 25% of the disruptive US telecoms operator, with rumours circulating to suggest it was considering clearing out 20%. These reports have now been confirmed by Softbank, with the team exploring various options including private placements, public offerings or transactions with T-Mobile US itself, and/or its existing shareholders.
“The exploration of any Potential Transactions will involve discussions and negotiations between or among T-Mobile and Deutsche Telekom AG, which SBG has had and continues to have,” Softbank said in a statement.
“The determination to conduct any Potential Transactions will be based on factors, including, among other things, the price level and liquidity of T-Mobile common stock; general market and economic conditions; the outcome of any negotiations with Deutsche Telekom AG or T-Mobile; other business and investment opportunities or disposition transactions that may be available to SBG; ongoing evaluation of T-Mobile’s business, financial condition, operations, and prospects; regulatory, tax and accounting considerations.”
In short, the Softbank executive team is searching for the best way to make money.
Last month, Softbank announced a new initiative to raise as much as $41 billion to repurchase shares and reduce debt. The programme seems to be one thrust upon executives dealing with the COVID-19 fallout which has ravaged Softbank’s investments in technology, media and telecoms ecosystems.
In April, the management team revealed the financial impact of adverse trading conditions on its spreadsheets, and it was not pretty. The Vision Fund, an investment vehicle championed by Softbank founder Masayoshi Son and intended to diversify revenues for the telecoms operator, reported year-on-year losses of $17 billion.
While this sounds like an unbelievable number, you have to appreciate some of the investments the Vision Fund has made in recent years. OneWeb recently filed for Chapter 11 Bankruptcy after talks for additional Softbank funding fell through, WeWork’s prospects have been disappearing down the toilet, while Uber is facing somewhat of an existential threat. Not all of these adverse tales have been caused by COVID-19, but they are all happening at the same time. And these are just three examples.
Selling a stake in T-Mobile US is an option, but it demonstrates what an uncomfortable position Softbank is in. The disruptive US telecoms operator is gathering momentum in the battle against AT&T and Verizon, mid-way through a promising integration with Sprint and arguably in the most attractive position in the 5G race thanks to access to mid-band spectrum. This is a business on the up, and we suspect executives would not consider such a sale, despite it being profitable, unless absolutely forced to.
|Omdia forecast for 5G subscriptions in USA (2020-22)|
Source: Omdia World Information Series
*T-Mobile US numbers inclusive of Sprint subscription forecasts