Charter Communications says "no interest" in buying Sprint (updated)

Liberty Broadband

31/07/2017 06:55

(Adds sourcing on SoftBank considering a bid, more details on 
the companies, analyst comment, SoftBank shares) 
    By Greg Roumeliotis and Liana B. Baker 
    July 30 (Reuters) - U.S. cable operator Charter 
Communications Inc  CHTR.O  said on Sunday it was not interested 
in acquiring U.S. wireless carrier Sprint Corp  S.N , leaving 
the latter's majority owner, SoftBank Group Corp  9984.T , 
pondering how to orchestrate a merger. 
    A merger of Charter and Sprint would create a 
telecommunications powerhouse, providing a one-stop shop for 
customers looking for internet and mobile phone services, giving 
the combined company a stronger footing in creating the 
infrastructure required for so-called 5G wireless technology. 
    SoftBank Chief Executive Masayoshi Son is considering making 
an acquisition offer for Charter, which has a market 
capitalization of $101 billion and another $60 billion in debt, 
as early as this week, a person familiar with the matter said on 
Sunday, in what would be by far the Japanese telecommunications 
conglomerate's biggest ever deal. 
    SoftBank remains interested in merging Sprint with T-Mobile 
US Inc  TMUS.O , another U.S. wireless carrier controlled by 
Germany's Deutsche Telekom AG  DTEGn.DE , with which Sprint held 
deal negotiations earlier this year, the source added. 
    The source asked not to be identified because the 
deliberations are confidential. SoftBank declined to comment. 
    "We understand why a deal is attractive for SoftBank, but 
Charter has no interest in acquiring Sprint," a Charter 
spokesman said in an emailed statement on Sunday. He declined to 
comment on whether Charter would entertain a bid from SoftBank 
and at what price. 
    Sprint and T-Mobile could not be immediately reached for 
comment. 
    SoftBank's potential bid for Charter would come after two 
months of negotiations with both Charter and cable peer Comcast 
Corp  CMCSA.O  over Sprint potentially serving as their mobile 
virtual network operator (MVNO), allowing them to use its 
network to offer wireless services. 
    SoftBank's interest in Charter also shows it is looking for 
alternatives to strengthen its negotiating hand in Sprint's 
negotiations with T-Mobile, analysts said. 
    "This could be a way to gain leverage in a T-Mobile deal,"  
Macquarie analyst Amy Yong said of Son's pursuit of Charter on 
Sunday.  
    To be sure, a bid for Charter by SoftBank, which has a 
market capitalization of 9.9 trillion yen ($90.3 billion), would 
be a stretch for its finances, given that it would likely be 
without the deployment of the $100 billion technology-focused 
investment fund called Vision Fund it raised this year. 
    Sprint's market capitalization is just $32.8 billion, and it 
has a similar amount in debt. A bid for Charter that would give 
SoftBank majority control in a deal would require raising tens 
of billions of dollars in new debt and could push SoftBank to 
leverage some of its other assets, including its 29.5 percent 
stake in Chinese internet giant Alibaba Group Holding Ltd 
 BABA.N  and its 43 percent stake in Yahoo Japan Corp  4689.T . 
    SoftBank shares were trading down 2.7 percent at 8,920 yen 
on Monday morning in Tokyo. 
    Another hurdle for SoftBank would be the price expectations 
of Charter's largest shareholder, John Malone's Liberty 
Broadband Corp  LBRDA.O . Charter's proxy statement to its 
shareholders in March showed that CEO Tom Rutledge has 
compensation incentives to take Charter's share price to more 
than $564. Charter shares ended trading on Friday at $370.26. 
    What is more, were Charter to agree to a merger with Sprint, 
it would need the blessing of Comcast. Charter and Comcast 
announced an agreement in May that bars either company from 
entering into a material transaction in wireless for a year 
without the other's consent. 
     
    IN NEED OF A DEAL 
    Verizon Communications Inc  VZ.N , the No. 1 U.S. wireless 
carrier, also expressed interest in a takeover of Charter 
earlier this year, sources have said. Verizon, which has a 
healthier network than Sprint, has MVNO agreements in place with 
both Charter and Comcast, which are rolling out wireless plans 
for their customers using the Verizon partnership. 
    Three years ago, SoftBank abandoned talks to acquire 
T-Mobile for Sprint amid opposition from U.S. antitrust 
regulators. That deal would have put SoftBank in control of the 
merged company, with Deutsche Telekom becoming a minority 
shareholder. 
    T-Mobile was worth around $30 billion at the time, but its 
market value has since risen to more than $50 billion as it 
overtook Sprint as the No. 3 wireless carrier by subscribers.  
    While Sprint's customer base has also grown under CEO 
Marcelo Claure and financials have improved, the growth was 
primarily driven by heavy price discounts. Despite new 
investment, the company's network is still viewed by many 
consumers as weaker than its rivals. 
    Unless Sprint can clinch a merger with a peer, these 
investment requirements are set to become more pressing. 
Carriers will need to spend billions of dollars to upgrade to 5G 
networks that promise to be 10 times to 100 times faster than 
current speeds. 
 
 (Reporting by Greg Roumeliotis in New York and Liana B. Baker 
in San Francisco; Additional reporting by Makiko Yamazaki in 
Tokyo, Abinaya Vijayaraghavan in Bengaluru and Anjali Athavaley 
in New York; Editing by Amrutha Gayathri and Christopher 
Cushing) 
 ((abinaya.vijayaraghavan@thomsonreuters.com; within U.S.+1 646 
223 8780; outside U.S. +91 80 6749 2733; Reuters Messaging: 
abinaya.vijayaraghavan.thomsonreuters.com@reuters.net)) 
 
Keywords: CHARTER COMMNS M&A/SPRINT CORP