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Sprint, T-Mobile Settle on $32B Price

Alan Breznick
6/5/2014
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Sprint and T-Mobile have worked out the broad terms of a $32 billion merger that would potentially turn the combined company into a much more powerful competitor in the huge US wireless market.

The deal worked out by negotiators calls for Sprint Corp. (NYSE: S) to pay about $40 a share for T-Mobile US Inc. in a stock-and-cash arrangement, according to multiple news reports Thursday morning. That represents about a 17% premium over T-Mobile's closing stock on price on Wednesday. Neither of the companies were commenting on the reports this morning.

Even with the price apparently settled, though, the two companies must still hammer out a formal merger contract over the next few days or weeks. So the deal could still fall through if other terms can't be worked out.

If the deal is consummated, it would bring together the third- and fourth-biggest wireless carriers in the US, thus creating a much larger rival to the dominant duo of AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ). SoftBank Corp. Chairman Masayoshi Son, whose company owns Sprint, has long argued that such a merger is necessary to create a national carrier with the resources to upgrade its network and compete against AT&T and Sprint. (See SoftBank Could Consider Euro Acquistions,)

But, by narrowing the wireless field in the US from four to three major carriers, the proposed deal would raise strong regulatory concerns in Washington, D.C. Both the Antitrust Division of the U.S. Department of Justice and the Federal Communications Commission (FCC) have already signaled that they favor four strong players in the market, not three, and regulators stepped in to block AT&T's proposed $39 billion bid for T-Mobile just three years ago.

Despite such concerns, the news reports say, both companies think their timing may be better now because of new developments at the FCC, including the latest stormy debate over net neutrality rules and new spectrum auction rules that appear to favor AT&T and Verizon over the smaller carriers. They are also hoping that the recent wave of proposed big US media mergers, including AT&T's $49 billion deal to buy DirecTV Group Inc. (NYSE: DTV) and Comcast Corp. (Nasdaq: CMCSA, CMCSK)'s $45 billion agreement to purchase Time Warner Cable Inc. (NYSE: TWC), may have shifted the regulatory landscape.

Under the proposed deal, Deutsche Telekom AG (NYSE: DT), the majority owner of T-Mobile with a 67% stake, would continue to hold a 15% to 20% stake in the new combined company, according to the reports. That would free up the German carrier to concentrate on its European markets.

We'll have much more to say on this proposed merger as more details unfold. What had already promised to be a busy summer has just gotten even busier.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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KBode
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KBode,
User Rank: Light Sabre
6/6/2014 | 11:34:47 AM
Re: Competition
"Could AT&T have been agressive in their pricing in response to T-Mobile as a way to prevent Sprint buying T-Mobile long before it was even announced?  Where has Verizon and Sprint been in the price drops?"

I actually  think AT&T's reactions are mostly cosmetic, with the lion's share of price cuts being only modest cuts to 10 GB plans and higher. Sprint has responded somewhat with their "Framily" plans, but Verizon continues to believe they're network is SO GOOD they simply don't have to compete on price.
mjgraves
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mjgraves,
User Rank: Lightning
6/6/2014 | 11:31:08 AM
Re: Mobile in the Hills
As a long time T-Mobile customer I can tell you...good luck with that! T-Mobile's coverage is typically thought to be the worst of all four. In the cities and suburbs they are ok.

In rural areas they drop back to 2G in may places.
lanbrown
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lanbrown,
User Rank: Light Sabre
6/5/2014 | 10:54:01 PM
Competition
"Sprint said the deal would severely reduce competition in the United States cell phone industry."

So, if going from four to three would reduce competition in 2011, then going from four to three in 2014 will be no different.  I think the words from Sprint in 2011 should be used against them today.  Imagine the irony in that.

 

One hurdle, Sprint hates to open their network to BYOD in terms of the consumer whereas T-Mobile welcomes them with open arms.  Sprint is bad for the consumer; having them buy a pro-consumer company will not help competition but kill it.  Verizon is not too friendly with BYOD either.  AT&T at least tolerates it.

 

Could AT&T have been agressive in their pricing in response to T-Mobile as a way to prevent Sprint buying T-Mobile long before it was even announced?  Where has Verizon and Sprint been in the price drops?
sarahthomas1011
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sarahthomas1011,
User Rank: Light Beer
6/5/2014 | 5:25:38 PM
$$$
What do we think of the price point? Just below $39 billion AT&T offered for T-Mobile, but that makes sense given there relative sizes. Still a huge deal!
sarahthomas1011
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sarahthomas1011,
User Rank: Light Beer
6/5/2014 | 5:24:31 PM
T-Mobile robots
Well we all knew this was coming, although the timing was up in the air with reports of them waiting for the auctions to be over. I guess they're feeling confident enough now. The mega cable deals are probably part of the reason why too, although nothing is finalized yet.

I think it was the timing of anouncing this with his robots, but I get the feeling Softbank/Son is taking over the world!
sarahthomas1011
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sarahthomas1011,
User Rank: Light Beer
6/5/2014 | 5:22:34 PM
Re: Mobile in the Hills
Sprint's deal with the CCA will help with that more than anything. I'm assuming that will still go through. I bet T-Mobile will join in too, which is even better news for rural America.
sam masud
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sam masud,
User Rank: Light Sabre
6/5/2014 | 3:19:55 PM
Re: Mobile in the Hills
I live within city limits but can't get a Tmobile signal if I am inside my home (it fine if I step outside)--a neighbor says she has the same problem with Verizon.
jabailo
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jabailo,
User Rank: Light Sabre
6/5/2014 | 12:40:49 PM
Mobile in the Hills
As a long time Virgin Mobile (which leases the Sprint network) customer, I hope this expands Sprint's coverage to beyond the Metro areas, like many other carriers.  The signals tend to drop or get lost in the far reaches of the suburbs and certainly in rural areas.

And I still wonder where Sprint is going with wireless broadband.  Is it only for mobile and short use (LTE data caps) or will they continue the Clear model of always on, unlimited data home use...

 
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