April 29, 2018
The Board of Directors
Sprint Corporation
6200 Sprint Parkway
Overland Park, Kansas 66251
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of common stock, par value $0.01 per share (the “Company Common Stock”), of Sprint Corporation (the “Company”) of the Exchange Ratio (as defined below) in the proposed merger (the “Merger”) of the Company with an indirect, wholly-owned subsidiary of T-Mobile US, Inc. (the “Merger Partner”). Pursuant to the Business Combination Agreement (the “Agreement”), among the Company, the Merger Partner, SoftBank Group Corp. (“SoftBank”), Galaxy Investment Holdings, Inc. (“Galaxy”), Starburst I, Inc. (“Starburst”), Huron Merger Sub LLC (“Merger Company”), Superior Merger Sub Corp. and the other parties thereto, the Company will become an indirect, wholly-owned subsidiary of the Merger Partner, and each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (as defined in the Agreement), other than any shares of Company Common Stock held directly by the Company as treasury stock or held directly by Merger Company, will be converted into the right to receive 0.10256 shares (the “Exchange Ratio”) of the Merger Partner’s common stock, par value $0.00001 per share (the “Merger Partner Common Stock”). In addition, pursuant to the Agreement, immediately prior to the Effective Time, each of Galaxy and Starburst will, unless abandoned in accordance with the Agreement, be merged with and into Merger Company, with Merger Company continuing as the surviving corporation and as a direct, wholly-owned subsidiary of the Merger Partner (the “SoftBank US Mergers” and, together with the Merger, the “Transaction”), and each share of common stock, par value $0.01 per share, of Galaxy and of common stock, par value $0.01 per share, of Starburst outstanding immediately prior to the SoftBank US Mergers Effective Time (as defined in the Agreement) will be converted into the right to receive an amount of Merger Partner Common Stock calculated pursuant to a formula set forth in the Agreement and based in part upon the Exchange Ratio. You have informed us that Galaxy and Starburst collectively directly hold 100% of SoftBank’s indirect interest in the Company and have no other assets or liabilities that would be material to our analysis.
In connection with preparing our opinion, we have (i) reviewed a draft of the Agreement furnished to us on April 28, 2018 and labeled “Execution Version”; (ii) reviewed certain publicly available business and financial information concerning the Company and the Merger Partner and the industries in which they operate; (iii) compared the proposed financial terms of the Merger with the publicly available financial terms of certain transactions involving companies we deemed relevant and the consideration paid for such companies; (iv) compared the financial and operating performance of the Company and the Merger Partner with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of the Company Common Stock and the Merger Partner Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial analyses and forecasts prepared by or at the direction of the managements of the Company and the Merger Partner relating to their respective businesses, as well as the estimated amount and timing of the cost savings and related expenses and synergies expected to result from the Merger (the “Synergies”); and (vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of the Company and the Merger Partner with respect to certain aspects of the Merger, and the past and current business operations of the Company and the Merger Partner, the financial condition and future prospects and operations of the Company
L-1
and the Merger Partner, the effects of the Merger on the financial condition and future prospects of the Company and the Merger Partner, and certain other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company and the Merger Partner or otherwise reviewed by or for us. We have not independently verified any such information or its accuracy or completeness and, pursuant to our engagement letter with the Company, we did not assume any obligation to undertake any such independent verification. We have further assumed, for purposes of our financial analysis, that each share of Company Common Stock issued and outstanding immediately prior to the SoftBank US Mergers, other than any shares of Company Common Stock held directly by the Company as treasury stock, will be converted into the right to receive a number of shares of the Merger Partner Common Stock equal to the Exchange Ratio. In addition, at your direction, for purposes of our financial analysis, we have disregarded, and not given any effect to, the occurrence of the SoftBank US Mergers. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Company or the Merger Partner or any other party to the Agreement under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, including the Synergies, we have assumed that they have been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company and the Merger Partner to which such analyses or forecasts relate. We express no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement will qualify as a tax-free reorganization for United States federal income tax purposes and otherwise have the tax consequences described in discussions with, and materials furnished to us by, representatives of the Company, and will be consummated as described in the Agreement, without any modifications to the structure of the Transaction that would be material to our analysis, and that the definitive Agreement will not differ in any material respects from the draft thereof furnished to us. We have also assumed that the representations and warranties made by the Company, the Merger Partner and the other parties in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or the Merger Partner or on the contemplated benefits of the Transaction.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, to the holders of the Company Common Stock as of immediately prior to the SoftBank US Mergers of the Exchange Ratio in the proposed Merger and we express no opinion as to the fairness of any consideration to be paid in connection with the Transaction to the holders of any other class of securities, creditors or other constituencies of the Company or in connection with any other transaction contemplated by the Agreement (including the SoftBank US Mergers) or as to the underlying decision by the Company to engage in the Transaction. We also do not express any opinion as to the terms of the Stockholders’ Agreement or the Voting and Proxy Agreement (each as defined in the Agreement) or any governance or other rights in either thereof or in the other documentation being entered into in connection with the Transaction and the other transactions contemplated by the Agreement (and have not taken any such terms or rights into account in our analysis), and our opinion does not take into account the individual circumstances of any holders with respect to control, governance or other rights which may distinguish such holders from other holders. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the Exchange Ratio applicable to the holders of the Company Common Stock in the Merger or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which the Company Common Stock or the Merger Partner Common Stock will trade at any future time.
L-2
We note that we were not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of the Company or any other alternative transaction.
We have acted as financial advisor to the Company with respect to the proposed Merger and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Merger is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. During the two years preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with the Company, the Merger Partner and their respective ultimate parent companies, SoftBank and Deutsche Telekom AG (“DT”), for which we and such affiliates have received or may receive customary compensation. Such services during such period have included acting as joint bookrunner on the Company’s offering of debt securities in October 2016, February 2018 and March 2018; as joint lead arranger and bookrunner on the Company’s credit facility in February 2017 and September 2017 (which was subsequently terminated in February 2018); as joint bookrunner on offerings of debt securities by the Merger Partner in November 2015, March 2016, March 2017 and January 2018; as joint lead arranger and joint bookrunner on SoftBank’s credit facility in November 2017; as joint bookrunner on offerings of debt securities by DT in April and September 2016 and as a co-advisor to DT on a joint venture involving one of its affiliates. In addition, our commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of the Company, for which it receives customary compensation or other financial benefits. In addition, we and our affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of the Company, the Merger Partner, SoftBank and DT. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of the Company or the Merger Partner for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities or other financial instruments.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Exchange Ratio in the proposed Merger is fair, from a financial point of view, to the holders of the Company Common Stock as of immediately prior to the SoftBank US Mergers.
The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC. This letter is provided to the Board of Directors of the Company (in its capacity as such) in connection with and for the purposes of its evaluation of the Merger. This opinion does not constitute a recommendation to any shareholder of the Company as to how such shareholder should vote with respect to the Merger, the Transaction or any other matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any consent solicitation statement or information statement mailed to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
/s/ J.P. Morgan Securities LLC
J.P. MORGAN SECURITIES LLC
L-3
