Deutsche Telekom has struck a $7 billion U.S. stock swap deal with SoftBank Group to increase its stake in U.S. telecommunications company T-Mobile (NASDAQ:TMUS) in a deal that strengthens the German group's transatlantic business.
Deutsche Telekom will raise its stake in T-Mobile by 5.3% to 48.4%, bringing closer its goal of securing direct control over the $170 billion U.S. telecom operator.
SoftBank will receive cash and a 4.5% stake in Deutsche Telekom, establishing a direct shareholder relationship after the Japanese group sold its U.S. Sprint unit to T-Mobile in a deal that closed in early 2020.
The latest transactions bring Deutsche Telekom within striking distance of majority ownership over T-Mobile, which accounts for three-fifths of its group sales and is its most profitable unit.
As part of the complex transaction, Deutsche Telekom will trigger option agreements, enabling it to lock in an average price of $109 per share for the 65 million T-Mobile shares it is acquiring, below last week's closing price of $136 a share.
For SoftBank, the share swap deal substitutes a residual stake in the U.S. business for a strategic holding in Deutsche Telekom, which is also present in a dozen European countries. SoftBank has agreed not to sell its Deutsche Telekom shares before the end of 2024.
Shares in SoftBank, which is the world's biggest technology investor through its Vision Fund, rallied 10% on the news in Asian trading, while Deutsche Telekom rose 1.1% in European trading.
Separately, Deutsche Telekom sold its Dutch unit T-Mobile Netherlands to a consortium of private equity firms for $6.1 billion U.S. Deutsche Telekom acquired control of T-Mobile Netherlands from Sweden's Tele2 in 2018 but never considered the unit, which ranked a distant third behind KPN and Vodafone Ziggo, as a core asset.
