A long-awaited union in the wireless industry between T-Mobile US and Sprint could finally become a reality, writes RCR Wireless News’ Martha DeGrasse. According to a recent CNBC report, a merger between the two carriers could be just a few weeks away, but neither side is talking.
Even though neither T-Mobile US or Sprint would comment, the thought of a merger is making waves as Sprint’s stock increased by more than 8% when the news broke and T-Mobile’s stock rose approximately 3%.
According to the report, the deal would be stock-for-stock in nature. T-Mobile US and its parent company, Deutsche Telecom would come out of the merger as the majority owner. Sprint’s parent company is SoftBank. Currently, the sides have not agreed to exchange ratio for a potential deal, but talks are in the works to produce a term sheet.
“The fact that T-Mobile US/Deutsche Telecom would be the majority holder should not be seen as a surprise at this point,” Wells Fargo analyst Jennifer Fritzsche told RCR Wireless News.
Although Fritzsche doesn’t expect a deal to close anytime soon, she believes an announcement could come within the next few months. “In our view, such a deal would take at least a year to get approval and there is much logic on announcing a transaction before the November 2018 election cycle,” she said.
A potential merger has been a possibility since SoftBank acquired Sprint in 2012. The motivation for such a deal was sprung from the possibility of billions of dollars in cost synergies that a merger like this could produce. The companies talked about a merger earlier in 2017; Softbank’s Masayoshi Son expressed willingness to sell Sprint to T-Mobile.
If the merger went according to plan and T-Mobile and Deutsche Telecom came out as the majority owner, Son has expressed he’d still want to give input on how the company is run. That stipulation could make what’s already a difficult transaction even harder to close, according to the CNBC report. Other factors that could slow things down are T-Mobile hasn’t started its due diligence on Sprint, which could change price expectations as well as if a merger between the No. 3 and No 4 wireless carriers in the U.S. would even be approved by antitrust regulators.
A successful merger could also affect consumers. There’d be less price wars and discounts on data in a three-carrier ecosystem. Analysts believe that with three major carriers, a pricing equilibrium could form and carriers would be able to produce more money to invest in their networks. That move could play a major role as the industry moves forward into 5G territory, which would require a large outlay of capital.
For more on this topic read this article here.