German telecommunications company Deutsche Telekom and Japanese multinational conglomerate holding firm SoftBank Group have signed a deal under which Deutsche Telekom will increase its stake in wireless network operator T-Mobile US (TMUS) by 5.3% to 48.4%, according to a report by StreetInsider.com.
As per the terms of the equity share swap agreement, Deutsche Telekom will buy 45 million shares of T-Mobile from Softbank in return for 225 million of its new shares. Furthermore, Deutsche Telekom will acquire another 20 million shares of T-Mobile after it completes the sale of T-Mobile Netherlands to a consortium of Apax Partners and Warburg Pincus for €5.1 billion.
Meanwhile, SoftBank will retain a 3.3% stake in T-Mobile and acquire a 4.5% stake in Deutsche Telekom. (See T-Mobile stock chart on TipRanks)
The COO of SoftBank and CEO of SoftBank Group International, Marcelo Claure, said, “The long-term strategic partnership will create incredible opportunities for our portfolio companies to turbocharge their growth with access to approximately 300 million customers across Japan, Europe and the U.S. in total.”
“The transaction diversifies our telecoms exposure and results in SoftBank becoming Deutsche Telekom’s second-largest private shareholder while retaining meaningful exposure to high-growth T-Mobile,” Claure added.
Last month, Morgan Stanley analyst Simon Flannery maintained a Buy rating on T-Mobile with a price target of $148 (8.8% upside potential).
The analyst expects the company to report earnings per share (EPS) of $0.78 in the third quarter.
Overall, the stock has a Strong Buy consensus rating based on 13 Buys and 2 Holds. The average T-Mobile US price target of $169.38 implies 24.5% upside potential. The company’s shares have gained 21.9% over the past year.
According to TipRanks’ Smart Score rating system, T-Mobile scores a “Perfect 10,” suggesting that the stock is likely to outperform market averages.
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