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SoftBank to Drop Effort to Merge Sprint With T-Mobile

SoftBank is said to be giving up efforts to merge Sprint with T-Mobile US.

Over the weekend, SoftBank’s board met in Japan and expressed concern about giving up control, the people said.

Sprint shares tumbled Monday after the Nikkei initially reported that SoftBank planned to break off negotiations with Deutsche Telekom. Sprint shares fell 11%, while T-Mobile dropped 5.5% in Monday afternoon trading. Shares of other telecom companies also fell. AT&T Inc. was 1% lower Monday afternoon while shares of Verizon Communications Inc. were down 2%.

Instead of a merger, Sprint plans to make a significant investment in its network, one of the people said.

A decision to walk away from the deal would echo the last time the two companies explored a merger, in 2014. Sprint was poised to acquire T-Mobile but scrapped the plan after realizing regulators were sure to oppose a combination of the No. 3 and No. 4 U.S. providers by subscribers.

In this case, the SoftBank board thought giving up control was unwise, given Sprint Chairman Masayoshi Son’s belief that artificially intelligent robots and other devices are the future, and connectivity of those devices will be critical to those new businesses, one of the people said.

Mr. Son is the founder and CEO of SoftBank. Sprint CEO Marcelo Claure is also on SoftBank’s board.

While a deal to merge the companies was close, there were lingering concerns about control, people familiar with the matter have told The Wall Street Journal. Last week both companies skipped earnings conference calls to avoid discussing the status of the talks.

Deutsche Telekom wanted control of the combined company because its U.S. earnings are important to its overall health. Under international accounting rules, a company must have full control of a subsidiary if it wants to include its earnings in quarterly reports.

But Mr. Son was reluctant to give up control, some of the people said. While he had agreed to give up control in principle, he had been looking for ways to maintain some sort of control now or in the future, they said.

Write to Ryan Knutson at ryan.knutson@wsj.com and Drew FitzGerald at andrew.fitzgerald@wsj.com


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