The next step in the proposed merger between T-Mobile and Sprint has commenced, bringing it ever closer to reality. The two companies have actually ironed out some details now. Sprint plans to pay T-Mobile $40 per share, in a 50% stock & 50% cash split deal later this summer. This would amount to a $32 Billion total cash price for the company, although Germany’s Deutsche Telekom AG, would still retain a 15% to 20% stake in the new company.
On top of this, the merger will also include a $1 billion+ (cash and other asset) break-up payment from Sprint to T-Mo if the deal falls through. This is similar to what happened when AT&T tried to buy T-Mobile in 2011. Of course, just like in that failed AT&T deal, even though this next big step has progressed forward in the process, that doesn't mean the deal will go through. There's still the huge hurdle of convincing the U.S. FCC and Department of Justice that this merger will be good for consumers and the market instead of harmful.
That's a pretty big hill to climb. In 2011, it was Sprint who supported the U.S. government's decision that the U.S. needed four carriers for the mobile industry to remain competitive. It seems a bit hypocritical of Sprint to now be arguing the opposite viewpoint. Of course, that is not an Apples to Oranges comparison. AT&T was/is already one of the two biggest forces in the mobile sector, whereas both Sprint and T-Mobile are much smaller and less successful. There is a compelling argument to be made that competition would be improved by having three strong competitors instead of two powerful ones and two weak ones.
What are your thoughts?
Source: WSJ