Sprint, T-Mobile Merge to Form 100 Million Customer Network: Good Deal?

04-30-2018 • https://www.themaven.net

The wireless merger deal, which regulators still must approve, would leave the U.S. wireless market dominated by three national players.

The all-stock deal would combine Sprint, which has a market value of $26 billion, with T-Mobile, which has a market value of $55 billion, based on Friday's closing prices. The two companies also have about $60 billion of combined net debt.

Under the terms of the deal, T-Mobile will exchange 9.75 Sprint shares for each T-Mobile share. T-Mobile parent Deutsche Telekom will own 42% of the combined company and Sprint parent SoftBank Group will own 27%. The remaining 31% will be held by the public.

Deutsche Telekom would also control voting rights over 69% of the new company and appoint nine of its 14 directors. The companies said they hope to close the deal in the first half of 2019.

Joining forces would create a wireless provider with nearly 100 million cellphone customers, second only in the U.S. to Verizon Communications Inc. The combined company, which would be called T-Mobile, would be run by T-Mobile CEO John Legere.

"This isn't a case of going from 4 to 3 wireless companies—there are now at least 7 or 8 big competitors in this converging market," Mr. Legere said on Sunday. The companies also vowed to boost hiring and spending in the U.S. after the transaction.

Sprint and T-Mobile executives could make the case that times have changed. Investments in 5G infrastructure could blur the lines between cellphone provider, cable company and technology firm. Even using current technologies, Comcast Corp. has rolled out low-cost wireless service to its cable customers that rides on Verizon's network.

Dish Network Corp. , led by its chairman Charlie Ergen, meanwhile is building a bare-bones wireless network that could be used to link autonomous cars, drones and other machines aside from cellphones. Companies could use that project to argue there are more than four nationwide wireless companies, though it would be a harder sell if Dish avoids directly competing with Sprint and T-Mobile.