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SoftBank

SoftBank gains near $13bn as Sprint's stock soars

Approval of T-Mobile merger offers big win following WeWork fiasco

SoftBank Group Chairman and CEO Masayoshi Son speaks in Tokyo. The company owns a 84% stake in Sprint.   © Reuters

NEW YORK -- A U.S. federal judge on Tuesday ruled in favor of the $26 billion merger between wireless carriers T-Mobile and SoftBank Group-owned Sprint, giving the Japanese conglomerate a much-needed boost after a series of investment flops.

The court decision, which came about six months after the acquisition was approved by the Department of Justice and the Federal Communications Commission, rejected a collective antitrust lawsuit by 13 states including New York and California, as well as the District of Columbia, which demanded an injunction on the transaction.

Sprint closed 77% higher Tuesday, boosting the value of SoftBank's 84.7% stake by close to $13 billion. 

The legal win marks a likely end to years of uncertainty on Sprint for SoftBank, which had seen a merger with larger competitor T-Mobile as its plan "from day one" when it acquired the U.S. carrier in 2013.

Many analysts had warned that if the merger could not go ahead, Sprint may not survive in the competitive, capital-intensive wireless services market -- a view cited by Judge Victor Marrero as part of his decision in favor of the acquisition.

"The overwhelming view both within Sprint and in the wider industry is that Sprint is falling farther and farther short of the targets it must hit to remain relevant as a significant competitor," the judge wrote.

The transaction, if finalized, will also give SoftBank some relief from its capital troubles as the Japanese conglomerate struggles to fundraise for its venture capital vehicle Vision Fund 2, amid investor skepticism following the fallout of costly SoftBank bets including in WeWork.

"The deal would help Sprint to de-consolidate [$33 billion] of net debt," Bernstein analyst Chris Lane and Yan Li said in a Tuesday research note issued before the court decision was made public. "De-consolidation represents 5% upside to our SoftBank full year forecast."

After the takeover, T-Mobile will become the country's third-largest wireless operator with enough scale to compete with Verizon and AT&T, the analysts said.

Lane had estimated that the merger could push up the equity value of the combined company to $101 billion, almost 15% more than what the two companies were together worth at the end of last year.

"We believe final approval of the merger will be a positive catalyst for SoftBank," the analysts said.

The merger between Sprint and T-Mobile is seen as important for the deployment of the fifth-generation wireless network in the U.S., a consideration that led the FCC to give its blessing, after the two companies promised to cover 97% of the country's population within three years of closing the deal.

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