Sprint and T-Mobile Move Toward a $32 Billion Deal

by Istvan Fekete on June 5, 2014

Two “smaller” players in the US wireless market, Sprint and T-Mobile, have agreed the broad outline of a merger that sets the latter’s price at $32 billion, people familiar with the matter have told the Wall Street Journal.

Under the agreed terms, Sprint would pay around $40 per share for T-Mobile, and the acquisition could be closed as early as this summer. The formal contract is still under development, and when completed, the merger would combine the country’s third- and fourth-largest carriers into a single wireless player strong enough to compete with AT&T and Verizon, while leaving consumers with fewer choices. Also, Sprint would pay T-Mobile more than $1 billion in cash and other assets if the deal is rejected, the sources say. The two parties can expect strong opposition from various parties.

A deal between Sprint and T-Mobile would extend a wave of consolidation that is uniting some of the biggest companies in the telecom and media industries, and is expected to face strong opposition from regulators and a lengthy antitrust review. A deal would need the approval of the Federal Communications Commission and the Justice Department.

What’s worth noting here is the game play Sprint has ventured into: the carrier is already heavily indebted and has posted losses for the past years, but company executives believe now is the time to move quickly to survive in the long-term.

At stake are the wireless industry’s valuable wireless customers and profits. T-Mobile’s uncarrier promotion has had the desired results: it has reversed subscriber losses and attracted customers from rival players, but executives of both Sprint and T-Mobile have agreed that the best way to create meaningful competition in the long term would be by joining forces.

The Sprint and T-Mobile merger could underscore Rogers CEO Guy Laurence’s recent words: there is no room for a fourth national player in Canada. Just to point to a couple of quick facts: the US has 326.4 million wireless subscribers, and the wireless industry is valued at $195.5 billion. By comparison, Canada has 27 million wireless subscribers, who generate a total economic value of $50.2 billion for the Canadian economy.

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Written by: Istvan Fekete. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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