Telco/Internet specialist

Kirk Boodry

Redex Research

Equity Bottom-Up

<p>News reports out of the US indicate the Sprint/T-Mobile merger may be in trouble. Sprint shares are down 10% after the close as investors are taking these reports more seriously than previous speed bumps like pauses in the FCC review process or rising Democrat influence after the mid-terms. It seems clear that the US Department of Justice is weighing anti-trust concerns more heavily than 5G deployment potential although it is not yet clear whether it will block the deal or ask for changes in the terms.</p><p>Neither option is good news for <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank Group (9984 JP)</a> , which is well into its pivot away from telcos into investments. For that reason, a restructured deal is the better outcome as Softbank management time has shifted to the Vision Fund and running Sprint on its own or pursuing another deal are likely to be seen as a drag on management time. On an absolute basis, a fall in Sprint's value from the $6 range it has recently traded in to $4 which it was closer to pre-merger values would knock ¥500 off Softbank shares, pre-holding company discount.</p>

News reports out of the US indicate the Sprint/T-Mobile merger may be in trouble. Sprint shares are down 10% after the close as investors are taking these reports more seriously than previous speed bumps like pauses in the FCC review process or rising Democrat influence after the mid-terms. It seems clear that the US Department of Justice is weighing anti-trust concerns more heavily than 5G deployment potential although it is not yet clear whether it will block the deal or ask for changes in the terms.Neither option is good news for Softbank Group (9984 JP) , which is well into its pivot away from telcos into investments. For that reason, a restructured deal is the better outcome as Softbank management time has shifted to the Vision Fund and running Sprint on its own or pursuing another deal are likely to be seen as a drag on management time. On an absolute basis, a fall in Sprint's value from the $6 range it has recently traded in to $4 which it was closer to pre-merger values would knock ¥500 off Softbank shares, pre-holding company discount.

Softbank Group

Softbank: Sprint Overhang Lingers