T-Mobile to Acquire Sprint for $26Bn

T-Mobile and Sprint

April 30, 2018//-T-Mobile US Inc agreed to acquire peer Sprint Corp, in an all-stock deal for $26 billion that will combine the third and fourth largest U.S. wireless carriers and is expected to attract regulatory scrutiny over its impact on consumers.

The agreement caps four years of on- and off- talks between the companies, setting the stage for the creation of a carrier with 127 million customers that will be a more formidable competitor to the No.1 and No.2 wireless players, Verizon Communications Inc and AT&T Inc.

U.S. regulators, which have challenged in court AT&T’s $85 billion deal to buy U.S. media company Time Warner Inc, are expected to grill Sprint and T-Mobile on how they will price their combined wireless offerings.

The breakthrough in the companies’ negotiations, first reported by Reuters on Thursday, came after T-Mobile majority-owner Deutsche Telekom AG and Japan’s SoftBank Group Corp, which controls Sprint, agreed on a structure that will allow Deutsche Telekom to continue to consolidate the combined company, which will have a market value of over $80 billion, on its books.

Deutsche Telekom will own 42 percent of the combined company, and will control the board of the combined company, nominating nine of the 14 directors.

The implied equity valuation for Sprint is $6.62 per share based on T-Mobile’s closing share price on Friday.

The all-stock transaction is at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share, or the equivalent of 9.75 Sprint shares for each T-Mobile US share.

Sprint’s and T-Mobile’s first round of merger talks ended unsuccessfully in 2014 after U.S. President Barack Obama’s administration expressed antitrust concerns about the deal.

Under U.S. President Donald Trump’s administration, regulators have continued to fret about consumer prices. The U.S. government has opened a probe into alleged coordination by AT&T, Verizon Communications and a telecommunications standards organization to hinder consumers from easily switching wireless carriers, a person briefed on the matter said earlier this month.

The second round of talks between Sprint and T-Mobile ended in November over valuation disagreements, although Deutsche Telekom CEO Tim Hoettges, left the door open at the time, saying: “You always meet twice in life.”

Since then, Sprint’s shares lost about a fifth of their value amid questions about how the company can compete effectively under the weight of its long-term debt of more than $32 billion.

Softbank has been looking to trim its own debt as well, which reached 15.8 trillion yen ($147 billion) as of the end of December. It has said it is planning to raise cash by taking its Japanese mobile phone unit public this year.

Failure to clinch a deal last November left SoftBank CEO Masayoshi Son, a dealmaker who raised close to $100 billion for his Vision Fund to invest in technology companies, in search of other options for Sprint.

Agency Report

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