TOKYO—Just five months ago, SoftBank Group Corp. 9984 4.08% chief Masayoshi Son said it was “key” for him to keep U.S. mobile carrier Sprint Corp. S 8.33% in his empire and he would “really regret” it in 10 years if he ever lost control.
Now Mr. Son appears ready to put that prediction to the test. People familiar with Mr. Son’s thinking say he is ready to enter a deal to combine Sprint with T-Mobile US Inc., TMUS 0.66% a move that would cede at least some control to T-Mobile parent Deutsche Telekom AG DTEGY 1.49% .
If the merger were completed, it would accelerate the Japanese billionaire’s turn away from what was once his core business, selling mobile-phone service. He has focused more recently on internet investments in companies such as ride-hailing leader Uber Technologies Inc. and a $100 billion investment fund he started last year with backing from Saudi Arabia.
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Mr. Son has long held that a merger between T-Mobile and Sprint, the No. 3 and No. 4 carriers in the U.S., was needed to compete with the two market leaders, Verizon Communications Inc. and AT&T Inc. The year after he bought control of Sprint for $22 billion in 2013, the pair came close to announcing a deal, but they gave up in the face of opposition from Obama administration regulators worried about excessive concentration in the industry.
Last year, Sprint and T-Mobile came close again. Then Mr. Son scotched a deal at the last second, saying Sprint was too important to SoftBank’s vision of a world where communication between machines, known as the Internet of Things or IoT, would drive new services.
“The IoT era is coming,” Mr. Son said at a news conference in November. “When you think of infrastructure for that era, control of Sprint is key. Losing control of Sprint means losing the U.S.—the biggest, wealthiest market. We’d really regret that in 10 years.”
What changed? One person close to Mr. Son said the pressure on Sprint to roll out next-generation technology needed to support IoT devices—called fifth-generation wireless—made him more amenable to relinquishing some control over the debt-laden U.S. wireless carrier.
Building out a fifth-generation network is costly: Mr. Son has said Sprint will increase capital spending to $6 billion this year from around $4 billion last year in a bid to keep up with Verizon and AT&T.
Both Sprint and SoftBank are already deep in debt—SoftBank even more than its subsidiary, with net debt estimated at nearly five times earnings before interest, taxes, depreciation and amortization, according to S&P Global Market Intelligence. That is a level most analysts consider unhealthy.
By joining forces with T-Mobile and its German parent, Sprint could save billions of dollars because it could share the costs of network equipment and retail stores, analysts say. T-Mobile’s market capitalization as of Friday, $55 billion, was more than twice Sprint’s at $26 billion, giving Deutsche Telekom the upper hand in any combination.
The exact terms of the proposed merger deal weren’t clear, but one person familiar with the discussions said they have discussed terms that would preserve a voice for Mr. Son in guiding the merged company, perhaps by distinguishing between stock ownership and voting rights.
Mr. Son has been moving away from his telecoms focus in his home market of Japan. SoftBank runs Japan’s third-biggest mobile carrier, which still contributes the bulk of the group’s revenue. Mr. Son has said he wants to list the unit, possibly by the end of this year.
Some SoftBank board members have expressed concern about the shift, with director Tadashi Yanai, head of Uniqlo parent Fast Retailing Co. , saying Mr. Son needs to focus on “real business” and not just speculative investments in internet startups.
But Mr. Son has at times expressed weariness with being a mobile phone operator. Average revenue per user has fallen in the U.S. and Japan, as smartphone saturation rises, while traffic has risen exponentially, demanding ever-higher spending on infrastructure. That situation, which Mr. Son has called “sad,” prompted him to turn with more fervor to investing.
He bought U.K. chip architecture designer Arm Holdings in 2016, paying $32 billion to gain what he called a crystal ball on the direction of technology.
SoftBank has reinvented itself many times in the past, moving from software distribution to publishing to broadband to telecommunications, with detours in banking and satellite broadcasting. Less than three years after buying Finnish game maker Supercell and declaring mobile games a core business, Mr. Son sold the company to prepare for SoftBank’s 2016 acquisition of Arm.
Write to Mayumi Negishi at mayumi.negishi@wsj.com and Phred Dvorak at phred.dvorak@wsj.com