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Sprint and T-Mobile Agree to Merger

Jun 5 2014, 1:26am CDT | by , in News | Latest Business News

Sprint and T-Mobile Agree to Merger
 
 

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Sprint and T-Mobile Agree to Merger

In a deal that will send shock waves through the telecommunications industry, Bloomberg has revealed. The deal equates to $40 per share, a 17% premium on Wednesday’s price at the close of trading, and will create a US super carrier to compete head-on with Verizon and AT&T.

Under the terms of the deal, T-Mobile majority owner Deutsche Telekom will trade its 67% stake for 15% of the merged business. The deal will also include a $1 billion breakup fee that Sprint will pay T-Mobile should the deal not go through.

Quoting “people with knowledge of the matter,” Bloomberg said the $32 billion mega deal will be financed 50% in stock and 50% in cash. It also confirmed the deal is still some way off from being formally announced with neither company likely to make the news official until July.

This isn’t surprising given that regulators will need to be convinced that the deal is in the best interests of consumers. It is expected that Sprint will propose twin models, one based on both companies working independently and a second projecting a full merger. AT&T’s $48.5 billion deal for DirecTV is said to have made both Sprint and T-Mobile executives confident that the move will be approved.

T-Mobile shares rose 6.5% to $36.50 in late trading while Sprint gained 4.8% in what was widely interpreted as a positive move by both companies. It is also familiar territory for T-Mobile, which agreed a similar massive merger with Orange in the UK in 2010.

The predominant feeling is that null , ranked first and second respectively in the US market. It will also give Sprint greater might in the upcoming 600 megahertz spectrum auction, especially since part of it excludes both Verizon and AT&T from bidding.

Where a snag could be hit is these rules are based on four major national carriers which may see the rules revisited and a merged Sprint and T-Mobile could also be excluded. All of which is likely to be just the start of a massive redrawing of the telecommunications industry should the deal be given the green light.

 

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