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Sprint, T-Mobile Reportedly OK a $32 Billion Merger Price
Sprint, T-Mobile Reportedly OK a $32 Billion Merger Price

By Seth Fitzgerald
June 5, 2014 11:34AM

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Even if T-Mobile and Sprint were enthusiastically pursuing a merger, there is a strong possibility U.S. regulators would shoot down the deal. Masayoshi Son, CEO of Sprint parent SoftBank, has been pursuing a merger deal for months, as it would give Sprint the tools to legitimately compete with AT&T and Verizon Wireless.
 



Sprint and T-Mobile have come to an agreement over key terms of their long-rumored merger, according to reports citing sources close to the companies. The parent companies of both wireless carriers, SoftBank and Deutsche Telekom, still have details to discuss. But Sprint reportedly has agreed to pay T-Mobile $32 billion, a valuation equivalent to $40 per share, which some analysts say is low for such a large company.

U.S. regulators are expected to scrutinize any potential deal merging the nation's third- and fourth-largest wireless carriers Sprint's owner, SoftBank, has been trying to win over Americans concerned about a lessening of competition by promising to wage a price war if the merger takes place.

Terms of the Deal

Sources close to SoftBank have told The Wall Street Journal that the acquisition could take place as soon as this summer. Sprint is taking risks in pursuing a merger with T-Mobile but the payoff could be substantial if regulators accept the deal. Sprint has gone so far as to offer T-Mobile $1 billion in cash and assets if the deal doesn't go through, sources say.

The acquisition price of $32 billion places a 17 percent premium on T-Mobile's current worth, based upon the company's closing share value Wednesday. Any potential merger between the carriers would be complicated by the existence of larger parent companies that own different percentages of each carrier.

Deutsche Telekom currently owns 67 percent of T-Mobile but its control over the company could diminish substantially as it may only be left with a 15 percent to 20 percent stake in the combined carrier. Deutsche Telekom would not necessarily fight a merger, however, because it could potentially receive billions in the deal.

Getting Through Regulators

Even if T-Mobile and Sprint were enthusiastically pursuing a merger, there is a strong possibility U.S. regulators would shoot down the deal. SoftBank CEO Masayoshi Son has been pursuing a merger deal for months, as it would give Sprint the tools to legitimately compete with AT&T and Verizon Wireless.

The Federal Communications Commission and Justice Department have both raised concerns about mergers among any of the top four U.S. carriers. AT&T attempted a $39 billion takeover of T-Mobile in 2011 but regulators refused to accept that deal. Since this deal is between the third- and fourth-place carriers, regulators may respond differently.

How regulators respond to a proposed merger between Sprint and T-Mobile will largely depend on whether Sprint and SoftBank can make the argument that competition will grow because of it. While there would be fewer carriers to choose from, SoftBank has already made the argument that a merger would result in more competition because Sprint would be a strong competitor to AT&T and Verizon.
 

Tell Us What You Think
Comment:

Name:

Art Janszen:

Posted: 2014-06-21 @ 7:02pm PT
A merger is the only sensible way for these two companies to make a strong competitor for AT&T and Verizon.

CKhama:

Posted: 2014-06-18 @ 3:38pm PT
This deal MUST happen for both the struggling companies and prevail. Later the Sprint brand will disappear and T-Mobile will keep shining.

T-Mobile Customer:

Posted: 2014-06-17 @ 3:48am PT
The merger between Sprint and T-Mobile would be a bad deal. In fact, the government needs to break up the major ISPs into several smaller companies. The FCC needs to enforce net neutrality and stop the ISPs from slowing the download and upload speeds.

After a used the 3 GB of data of my T-Mobile 4G Wireless Mobile Hotspot plan, the Internet speed got extremely slow. The speed test I did yesterday, 6-16-2014, at 12:03 pm, shows that the Download Speed was 0.06 Mbps and the Upload speed was 0.02 Mbps.

Vernon:

Posted: 2014-06-16 @ 3:06pm PT
I would love this merger!!!! Better deals will come from this.

Mike:

Posted: 2014-06-16 @ 6:00am PT
@emmer .. LTE is the reason no one is talking about the incompatible networks . GSM technology will phase away soon and they will use Voice over LTE .. I'm also assuming they will kill the wimax network as well.

Emmer:

Posted: 2014-06-06 @ 11:01am PT
Wow, nothing about incompatible networks? The Nextel acquisition turned out great, didn't it?

Rian:

Posted: 2014-06-06 @ 5:38am PT
I would be very surprised if the FEDS approve this merger. Regulators will have a problem of shrinking competition. But who knows at this point....

Vincent D. McBRIDE:

Posted: 2014-06-05 @ 9:03pm PT
T-Mobile must not stop now and keep building a great 4 G LTE network. It should not stop and sit and do nothing waiting for the OK from the FCC like it did with the AT&T deal and risk losing all of the forward motion of signing up new customers. It has to keep upgrading its new 4G LTE network and building out its low band spectrum. T-Mobile should be buying spectrum and building. After all it can just put it on Sprint buy out tap. And if the deal goes south T-Mobile will still have a good network with more customers than it has today plus any break-up fee at zero cost.



Neustar, Inc. (NYSE: NSR) is a trusted, neutral provider of real-time information and analysis to the Internet, telecommunications, information services, financial services, retail, media and advertising sectors. Neustar applies its advanced, secure technologies in location, identification, and evaluation to help its customers promote and protect their businesses. More information is available at www.neustar.biz.


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