By Soyoung Kim, Sophie Sassard and Michelle Sierra
NEW YORK/LONDON (Reuters) - Sprint Corp has lined up eight banks to finance its proposed acquisition of T-Mobile US Inc, edging closer to a deal that would merge the third- and fourth-biggest U.S. mobile operators, according to people familiar with the matter.
The debt package exceeds $40 billion and includes a bridge loan of roughly $20 billion from Japan's Softbank Corp to Sprint, as well as some $20 billion refinancing of T-Mobile's existing debt, the people said this week.
Five global banks - JPMorgan Chase & Co, Goldman Sachs Group, Deutsche Bank AG, Bank of America Merrill Lynch and Citigroup Inc - have agreed to finance Sprint's proposal to acquire the smaller rival, the people said.
Sprint, majority-owned by Softbank, has also tapped Japanese banks Mizuho Financial Group Inc, Bank of Tokyo-Mitsubishi UFJ Ltd and Sumitomo Mitsui Financial Group, the people added.
The companies will seek to finalize details of the financing in the coming month so they could announce a merger around August, said the people, who asked not to be identified because the matter is not public.
Softbank and T-Mobile owner Deutsche Telekom AG have agreed to broad terms of a deal, under which Sprint would pay around $40 per share for T-Mobile, valuing the smaller rival at nearly $32 billion, Reuters and others reported earlier this month.
Deutsche Telekom stands to pay a breakup fee of roughly $1 billion if it tries to get out of the deal, while the so-called reverse breakup fee that Softbank would have to pay should regulators block the transaction is about $2 billion, one person said.
Analysts see the regulatory challenge as the biggest hurdle facing the companies since both the U.S. Federal Communications Commission (FCC) and Department of Justice (DOJ) have expressed a desire to have at least two more network operators competing against the market leaders AT&T and Verizon.
JPMorgan, Bank of America and Citi declined to comment while Goldman Sachs, Deutsche Bank, Mizuho, Bank of Tokyo-Mitsubishi and Sumitomo Mitsui did not respond to requests for comment. Representatives of Sprint, Softbank, T-Mobile and Deutsche Telekom also did not respond to requests for comment.
Three years ago, regulators rejected AT&T's agreed $39 billion bid for T-Mobile, which resulted in AT&T paying Deutsche Telekom, as T-Mobile's full owner, a reverse break-up fee of $6 billion in cash and U.S. mobile assets.
Under the proposed sale to Sprint, Deutsche Telekom is expected to keep a stake of 15 percent or more in the combined company, people familiar with the matter have said.
The U.S. telecommunications sector is already in the throes of a major, broader consolidation, with AT&T seeking to buy satellite TV operator DirecTV and cable company Comcast trying to merge with rival Time Warner Cable.
The changes could create a clutch of media and telecoms giants and leave Sprint and T-Mobile an also-ran with an inferior business, making a combination more compelling than ever, according to people familiar with the companies' thinking.
Softbank Chairman Masayoshi Son has made no secret of his long-held desire to buy T-Mobile and merge it with Sprint, creating a carrier with the resources to upgrade its network and better compete with AT&T and Verizon.
For Deutsche Telekom, a gradual exit from the United States would allow it to concentrate on its European business, including at home in Germany where it faces an upcoming auction of radio spectrum and needs to invest more in optic fibre broadband.
(Reporting by Soyoung Kim and Michelle Sierra in New York and Sophie Sassard in London, additional reporting by Tessa Walsh in London; editing by Chris Reese, Matthew Lewis and Bernard Orr)