Sprint down 5.6%, TMobile down 3.4%. AT&T & Verizon will scream bloody murder over the combined spectrum assets should this ever come about.


If a Sprint Corp. merger with T-Mobile US Inc. happens, would-be lenders might be stuck on the sidelines.

In early-stage discussions between the two wireless carriers, an all-stock deal that would avoid the need for financing has emerged as a potential option, according to people familiar with the matter. Deutsche Telekom AG, the majority owner of T-Mobile, and SoftBank Group Corp., which holds about 83 percent of Sprint, still haven’t decided if they will even attempt a deal, said the people, who asked not to be identified because the negotiations are private.

Both Sprint and T-Mobile are also talking to other potential merger partners, the people said. The companies declined to comment. Shares of T-Mobile dropped 1.4 percent to $67.40 at the close in New York, while Sprint rose 1 percent to $8.96.

An all-stock offer would let Deutsche Telekom avoid paying a premium for Sprint while still making a compelling proposal for investors because of the long-term upside from cost savings and competitive advantages.

T-Mobile has an enterprise value of more than $80 billion, compared with about $70 billion for Sprint. Such an enormous combination would typically involve billions of dollars in financing, so a stock-for-stock merger might be disappointing for Wall Street banks, which make millions of dollars from lending fees on megadeals.

One of the proposals that’s been informally considered would involve Sprint and T-Mobile setting an exchange ratio that would give Deutsche Telekom a slightly higher percentage of the company than SoftBank, the people said. Neither company would own more than 50 percent of the new combination.

Both firms have also considered creating a holding company that would allow Deutsche Telekom to consolidate the new company’s earnings. SoftBank is willing to relinquish control of Sprint under certain conditions to get a transaction completed, one of the people said. Vodafone Group Plc and Idea Cellular Ltd. agreed to a similar structure earlier this year when the companies merged their Indian mobile operations.

A merger may also be complicated because it would require the approval of U.S. regulators -- no easy feat for a deal reducing the number of national wireless companies to three from four. Executives at SoftBank, Deutsche Telekom, T-Mobile and Sprint have all publicly discussed the advantages of a merger in recent weeks with investors, and Sprint Chief Executive Officer Marcelo Claure visited Washington late last month to discuss the next generation of wireless technology with regulators.