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SoftBank Enters into Long-Term Strategic Partnership and Equity Share Swap Agreement with Deutsche Telekom
Rhea-AI Impact
(Neutral)
Rhea-AI Sentiment
(Very Positive)
Tags
partnership
Rhea-AI Summary
SoftBank Group Corp. has announced a strategic partnership with Deutsche Telekom AG to enhance access to approximately 240 million customers in the US and Europe for its portfolio companies. Under a share swap agreement, SoftBank will receive 225 million new DT shares in exchange for approximately 45 million shares of T-Mobile US (TMUS). This deal diversifies SoftBank's telecom exposure and makes it the second-largest private shareholder in DT, while retaining a 3.3% stake in TMUS, with potential growth to 6.9% based on stock performance.
Positive
Strategic partnership with Deutsche Telekom expands customer base to approximately 240 million in Europe and the US.
SoftBank becomes second-largest private shareholder in Deutsche Telekom with a 4.5% stake.
Retains a 3.3% equity stake in T-Mobile US, with potential to increase to 6.9%.
Access to significant long-term upside in Deutsche Telekom shares.
Ongoing equity value creation expected from T-Mobile US through 5G leadership.
Negative
None.
Strategic Partnership Provides SoftBank Portfolio Companies Access to Approximately 240 Million Customers Across Europe and the US and Deutsche Telekom (“DT”) with ARPU Increase, Churn Reduction and JV Participation
SoftBank Receives 225 Million New DT Shares in Exchange for DT Receiving Approximately 45 million T-Mobile US (“TMUS”) Shares; DT Intends To Acquire Another Approximately 20 Million TMUS shares from SoftBank by Re-investing Proceeds from Announced Sale of T-Mobile Netherlands
SoftBank Diversifies Telecoms Exposure Across Japan, Europe and the US, with 41% Ownership of SoftBank Corp., 4.5% of DT and 3.3%1 of TMUS
SoftBank Exchanging TMUS Shares Underlying Primarily Fixed Price Options with No Upside, for DT Stock with Material Upside to Become Second Largest Private Shareholder with 4.5% Stake and Intended Board Representation
SoftBank Retains Meaningful Upside Exposure to TMUS and Expects TMUS to Continue Creating Significant Equity Value Through 5G Leadership and Merger Synergies
TOKYO--(BUSINESS WIRE)--
SoftBank Group Corp. (“SoftBank”) today announced that it has entered into a strategic partnership and equity share swap agreement with Deutsche Telekom AG (“DT”). Under the strategic partnership between the two companies, SoftBank’s more than 300 portfolio companies gain access to an additional, approximately 240 million DT customers across Europe and the US, providing these portfolio companies the ability to scale quickly and at a low cost. DT will benefit from ARPU increase, churn reduction and JV participation.
Under the equity share swap agreement, DT will exercise a portion of its call options that were granted by SoftBank in connection with their June 2020 agreement. DT will acquire approximately 45 million T-Mobile US (“TMUS”) shares from SoftBank in exchange for issuing 225 million new DT shares to SoftBank from its authorized capital. In a subsequent step, DT envisages exercising call options to acquire another approximately 20 million TMUS shares from SoftBank by re-investing $2.4 billion of expected disposal proceeds from the announced sale of T-Mobile Netherlands. As a result of these transactions – the equity share swap and the re-investment of proceeds – SoftBank will become a 4.5% shareholder in DT and retain a 3.3%1 equity stake in TMUS, which could increase to 6.9% through True-Up Shares, if TMUS stock price were to hit certain milestones.
The transaction diversifies SoftBank’s telecoms exposure across Japan, Europe and the US, with a 41% ownership of SoftBank Corp., 4.5% of DT and 3.3%1 of TMUS. SoftBank will have access to a total of nearly 300 million customers across the globe, including approximately 55 million from SoftBank Corp., approximately 95 million from DT and approximately 140 million from TMUS.
The transaction is financially compelling. SoftBank is exchanging TMUS shares underlying primarily fixed price options with no upside, for stock in DT, which SoftBank believes has significant long-term upside beyond the agreed reference price of €20.SoftBank will become the second largest private shareholder with intended board representation. In addition, SoftBank retains meaningful exposure to TMUS through shares underlying primarily floating options and, potentially, True-up Shares2. SoftBank expects significant ongoing equity value creation at TMUS as it maintains 5G leadership and unlocks merger synergies.
SoftBank will be able to use DT and TMUS stock as collateral for financing and hedging purposes. Any such transaction would be consistent with the long-term strategic partnership, with SoftBank retaining significant exposure to DT and TMUS share price.
“This is a landmark transaction that is a true win-win-win for our portfolio companies, SoftBank and Deutsche Telekom,” said Marcelo Claure, Corporate Officer, Executive Vice President & Chief Operating Officer of SoftBank Group Corp. and Chief Executive Officer of SoftBank Group International. “The long-term strategic partnership will create incredible opportunities for our portfolio companies to turbocharge their growth with access to approximately 300 million customers across Japan, Europe and the US in total. The transaction diversifies our telecoms exposure and results in SoftBank becoming DT’s second largest private shareholder, while retaining meaningful exposure to high-growth TMUS. It also marks a decisive step for DT towards their stated objective of acquiring a majority stake in TMUS, and the addition of the world’s largest technology investor in SoftBank validates their Telco 2030 vision and demonstrates the “Magenta Advantage.” I look forward to partnering with Tim and team long into the future.”
“We are delighted to welcome SoftBank as a new key investor and strategic partner for Deutsche Telekom and can’t wait to get to work on the value creation opportunities from this cooperation for both SoftBank and Deutsche Telekom,” said Timotheus Höttges, Chief Executive Officer, Deutsche Telekom AG.
In connection with the agreement, DT’s management will support a proposal by SoftBank to have Mr. Claure elected to the Supervisory Board of DT at the next annual general meeting. The transaction has been approved by the Board of Directors of SoftBank and the Supervisory Board of DT and is expected to close and become effective by incorporation in DT’s commercial register.
Sullivan & Cromwell acted as legal advisors to SoftBank on this transaction.
About SoftBank Group
The SoftBank Group invests in breakthrough technology to improve the quality of life for people around the world. The SoftBank Group is comprised of SoftBank Group Corp. (TOKYO: 9984), an investment holding company that includes stakes in telecommunications, internet services, AI, smart robotics, IoT and clean energy technology providers; the SoftBank Vision Funds, which are investing more than US$100 billion to help extraordinary entrepreneurs transform industries and shape new ones; the $US5 billionSoftBank Latin America Fund, the largest venture fund in that region, and the SB Opportunity Fund, a US$100 million fund dedicated to investing in enterprises founded by entrepreneurs of color in the U.S. To learn more, please visit https://global.softbank.
1 Includes anticipated impact of intended exercise of ~20M TMUS options by DT using $2.4 billion in proceeds from sale of T-Mobile Netherlands. Prior to the intended exercise of options, SoftBank ownership is 4.9%
2 True-up Shares become available if TMUS stock price hits certain milestones
What is the significance of SoftBank's partnership with Deutsche Telekom?
The partnership provides SoftBank's portfolio companies with access to about 240 million customers across Europe and the US, enhancing growth opportunities.
What financial benefits are associated with SoftBank's equity share swap with Deutsche Telekom?
The equity swap allows SoftBank to acquire 225 million new DT shares in exchange for about 45 million TMUS shares, diversifying its telecom exposure and providing significant upside potential.
How much equity does SoftBank retain in T-Mobile US after the partnership?
SoftBank will retain a 3.3% equity stake in T-Mobile US, with the potential to increase this to 6.9% based on certain stock performance milestones.
When was the agreement between SoftBank and Deutsche Telekom announced?
The strategic partnership agreement was announced recently, allowing for an equity share swap to take place.
How does this partnership affect SoftBank's market position?
The partnership solidifies SoftBank's position as a significant player in the telecom sector, gaining substantial access to DT's and TMUS's customer bases.
