Deutsche Telekom AG and SoftBank Group Corp signed a strategic cooperation and equity share swap agreement on Tuesday. SoftBank’s more than 300 portfolio firms that now have access to an extra 240 million customers in Europe and the United States. ARPU growth, churn reduction, and JV involvement will benefit DT.
An option grant from SoftBank that was made in connection with the June 2020 agreement will be exercised under the equity share swap agreement. By exchanging roughly 45 million T-Mobile shares with SoftBank, DT will issue approximately 225 million DT shares to SoftBank.
After that, DT plans to exercise its call options to acquire another 20 million TMUS shares from SoftBank by re-investing $2.4 billion of the expected disposal proceeds from the announced sale of T-Mobile Netherlands. To sum it all up: The equity share swap made SoftBank’s stake in the company grow from 3.3% to 6.9% through True-Up Shares, provided certain benchmarks are met.
SoftBank now owns 41 per cent of SoftBank Corp., 4.5 per cent of DT, and 3.3 per cent of TMUS, increasing its telecom exposure in Japan, Europe, and the United States. On the other hand, DT and TMUS will provide SoftBank access to a combined total of almost 300 million consumers.
Financially, the deal is appealing. Stocks in DT are being exchanged in place of those in TMUS, which are largely fixed-price options with limited upside since SoftBank believes DT has considerable long-term upside above the agreed-upon reference price of 20. In addition to its anticipated board presence, SoftBank will become the second-largest private stakeholder in the company’s history.