T-Mobile US and Sprint have come close to tentative terms on a merge. This is part of pathbreaking efforts to merge the third and fourth largest U.S. wireless carriers. The transaction would significantly unite the U.S. telecommunications market and represent the first transformative U.S. merger with significant antitrust risk to be agreed since the inauguration of U.S. President Donald Trump in January.
T-Mobile and Sprint believe the U.S. antitrust enforcement environment has become more favorable since the companies failed in their previous effort to combine in 2014 amid regulatory concerns.
“I don’t think any regulator who embraces regulatory humility and intellectual honesty about economics can say whether three or four or five [carriers] is the optimal number,” FCC chairman, Ajit Pai said. “What I do want to see is a competitive wireless marketplace.”
According to sources, about 40 to 50 percent of the combined company will be owned by Japan’s SoftBank, which owns Sprint. On the other hand, the remaining majority of stakes are held by T-Mobile owner Deutsche Telekom.
During 2014, SoftBank’s Son abandoned previous attempts to acquire T-Mobile for Sprint. Since then, T-Mobile has outpaced Sprint under Chief Executive John Legere, who sources said would lead the combined company. Ajit Pai, the chairman of the Federal Communications Commission, suggested the FCC finds, for the first time since 2009, that there is “effective competition in the marketplace for mobile wireless services.”
T-Mobile and Sprint will expect vender strategic investments in 5G and this would create new jobs, but it might also lead to layoffs, said Roger Entner, an analyst at Recon Analytics.
The agreement will bring the two businesses up to more than 130 million subscribers, just behind Verizon Communications and AT&T. Revenues would top $70 billion and, analysts said, there would be massive scope to cut costs.
Sprint shares rose five percent in premarket trading in New York, while T-Mobile rose one percent. T-Mobile has a market capitalization of $52 billion, while Sprint has a market capitalization of $32 billion.
“They will argue that the track record of T-Mobile and Sprint shows they are vigorous competitors and that this will not cease to be the case after the deal,” said Entner.