TOKYO/NEW YORK -- SoftBank Group unit Sprint on Sunday announced a long-sought merger deal with rival T-Mobile US, reaching a breakthrough after SoftBank Chairman and CEO Masayoshi Son agreed to give up control of the carrier to gain the scale needed to compete effectively in the battle over 5G.
The all-stock transaction will combine America's third- and fourth-largest wireless carriers into a new company to be established by SoftBank and T-Mobile parent Deutsche Telekom. T-Mobile CEO John Legere will retain his post at the merged carrier, which will keep the T-Mobile name, with Son and Sprint CEO Marcelo Claure to serve on the board. The required regulatory approval could take a year.
Deutsche Telekom will have a 41.7% stake in the new T-Mobile, while SoftBank will hold 27.4%, the two carriers said.
SoftBank began pursuing T-Mobile soon after acquiring Sprint in 2013. The last round of merger talks fell through in November 2017 as the two sides failed to reach an accord on ownership of the merged carrier. Because Sprint's market capitalization was smaller than T-Mobile's, there was a possibility that SoftBank would have to cede control as the minority partner, which Son then concluded would be unacceptable to the Japanese technology company's board.
But the two sides returned to the negotiating table a month or two ago, according to a source familiar with the situation.
The advent of superfast fifth-generation wireless technology, which is vital for the "internet of things," drove Son's change of heart. Commercial 5G service is set to begin in 2020, and American wireless carriers are jockeying for position. Top two players Verizon Communications and AT&T have used their scale to get a step ahead on investment in the necessary infrastructure.
Sprint and T-Mobile together would be able to make the heavy capital outlays needed for 5G while also competing with their larger rivals -- something nigh impossible for either to do alone. The two carriers together have 126 million subscribers, not too far off Verizon's 150 million and AT&T's 140 million, and plan to invest about $40 billion in 5G and other areas over three years.
SoftBank's recent focus on new technologies is likely a factor as well. Son cited artificial intelligence, the internet of things and smart robots as areas of interest in February. The U.S. wireless business may have fallen further down his priority list.
SoftBank has been investing in promising startups around the world through the Saudi-backed SoftBank Vision Fund. The company has also become Uber Technologies' largest investor, with a 15% stake, and announced in March plans for a massive solar power project in the Middle East.