Deutsche Telekom announced plans to increase its stake in T-Mobile US. It will use part of the proceeds from the just announced sale of T-Mobile Netherlands as well as issue new shares to Softbank in exchange for some of the latter's stake in T-Mobile US. In total, the two-fold transaction will raise its stake by 5.3 percent, from 43.2 percent to 48.4 percent, while Softbank's share drops to 3.3 percent.
The company plans to issue 225 million new Deutsche Telekom shares at EUR 20 each to SoftBank in exchange for 45 million T-Mobile US shares held by SoftBank. This implies an average price of USD 118 per share for T-Mobile, a small discount on its last close of USD 136, while the Telekom shares carry a premium compared to their recent trading price of around EUR 18.
In addition, Deutsche Telekom intends to purchase another 20 million T-Mobile US shares from SoftBank using part of the proceeds of the announced sale of T-Mobile Netherlands. This part of the transaction is priced at an average USD 109 per share, costing Telekom in total about USD 2.4 billion.
The deal exercises call options from the shareholders agreement struck in 2020 at the closing of the Sprint takeover. Deutsche Telekom said its long-term aim is to increase its stake in T-Mobile US to over 50 percent to maintain control and consolidate the business.
As a result of the share issue, SoftBank will become the second-largest private shareholder in Deutsche Telekom with a 4.5 percent stake. The Japanese company said the deal diversifies its telecom holdings to Europe, while keeping some exposure to the US market. Both shareholdings can be used for hedging and collateral.
Furthermore, SoftBank disposes of shares subject to fixed-price call options with no further upside, giving it instead potential upside from Telekom's stock. It still holds floating-price options to sell the remaining T-Mobile US shares and may receive additional 'true-up' shares if the US operator's share price hits certain milestones.
As part of the deal, Marcelo Claure, CEO of Softbank International, will join Telekom's supervisory board. The operators also agreed a strategic partnership, to help develop Softbank's businesses in Europe and the US across the Telekom footprint and work together on joint investments, including venture capital, and developing new services such as enterprise IoT.
