Sprint, T-Mobile to combine, companies announce

T-Mobile US Inc and Sprint Corp said Sunday they had agreed to a $26 billion all-stock deal and believed they could win over sceptical regulators because the merger would create thousands of jobs and help the United States beat China to creating the next generation mobile network.

With a deal done, the focus will turn to a challenging road to regulatory approval for a deal that leaves the USA with three major wireless firms instead of four. The combined company will start with 110,000 cell towers and expect to end up with around 85,000 macro sites, with radios supporting both Sprint and T-Mobile frequencies. The sources requested anonymity to discuss the confidential negotiations.

Should the deal be approved by US regulators – a tall order in an environment that has discouraged M&A between intra-industry entities – the New T-Mobile, as the companies are referring to it – T-Mobile’s parent company, Germany’s Deutsche Telekom, would own a 42% stake and seat nine board members, while Sprint’s parent Softbank would have a 27% stake and four board members. Analysts with Jefferies said that regulatory approval for the transaction between Sprint and T-Mobile seemed even riskier today. “A DOJ view that carriers are colluding could mean that a potential Sprint and T-Mobile merger would face higher scrutiny, making us somewhat less optimistic about that deal”.

Another wild card may be Sprint’s and T-Mobile’s foreign ownership.

Falling just behind Verizon, the new T-Mobile will have over 100 million subscribers.

A merger will require USA government approval, which many analysts say will be hard to gain.

The agreement indicates that SoftBank CEO Masayoshi Son, who invests billions in new markets including India and segments, has given up dreams about the U.S. telecom market due to competition from T-Mobile, a company owned by Germany’s Deutsche Telekom.

Sprint and T-Mobile say a merger is the only way for them to remain competitive with Verizon and AT&T in the wireless market and in the race to develop 5G networks.

In a press release, the companies touted the merger as a way to best position themselves to compete in the forthcoming 5G race for faster mobile Internet, choosing to go at it together rather than alone.

The company, which would be called T-Mobile, will have headquarters in Bellevue, Washington (T-Mobile’s current base) and Overland Park, Kansas, Sprint’s home.

But last November, after much speculation, the two companies issued a statement saying they “have ceased talks”. We can see what happens when you have three equally sized wireless players by looking at Canada.

The companies expected to have a better shot at the merger under the Trump administration.

The New York Times reported last week that the Justice Department had opened an antitrust investigation into whether AT&T and Verizon were colluding to make it harder for consumers to switch phone service providers.