Softbank will be pocketing an unexpected 12bn windfall profits

The fortunes of T-Mobile Us Inc (Nasdaq: TMUS) are set to change as its largest investor plans to acquire a remaining 8% stake in SoftBank Group Corp (OTCMKTS: SFTBF). According to the latest reports from Bloomberg and Handelsblatt, Deutsche Telekom AG (OTCMKTS: DTEGF) plans to become a significant shareholder by exercising its option to acquire SoftBank's 8% stake in T-Mobile. The transaction would generate a Windfall profit of $ 12 billion for Japan-based SoftBank. The sale of SoftBank would make T-Mobile more attractive to investors. T-Mobile stock is up 215% in the past few years and is close to reaching $ 170 billion. Competitor Verizon is only up 15% while AT&T is down 24% over the same period. The growth of T-Mobile can be traced back to the background of the merger with Sprint and the significant changes afterwards. In March 2021, T-Mobile CEO Mike Sievert said the company would buy back its shares starting in 2023 and offer investors $ 60 billion in return. It will use the cash from the merger with Sprint in 2020. This is intended to pay the shareholders a higher share price than dividends. However, Mike's plan could not materialize as Deutsche Telekom needs funds to acquire a remaining stake in SoftBank. Among the telecommunications companies in Europe, Deutsche Telekom is sitting on a considerable mountain of debt. The company is already spending massive sums on the 5G rollout. And with the latest initiative, Deutsche Telekom needs money to pay SoftBank. However, CEO Tim Hoettges thinks T-Mobile's price would rise soon, and then it would be wise to buy back shares at cheaper valuations. That means Deutsche Telekom could buy some of the T-Mobile shares at a lower price. However, Deutsche Telekom has to pay the current market price to SoftBank for more than half of the shares. Deutsche Telekom has to pay $ 120 per share if it exercises the option to buy an 8% stake. That's a discount of $ 135 to T-Mobile's closing price on Tuesday. Insurance and pension funds that own Deutsche Telekom shares, however, prefer regular dividends. They hire Mike to divert more funds towards rewards so Deutsche Telekom can continue increasing its stake.