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T-Mobile And Sprint Put Rumors To Rest, Announce Deal

May 01, 2018 4:06 AM ETSprint Corporation (S), TMUS76 Comments
Spencer Osborne profile picture
Spencer Osborne


  • T-Mobile and Sprint to combine in all-stock deal.
  • T-Mobile's John Legere will be CEO.
  • Deal must pass regulatory muster to finalize.

T-Mobile (NASDAQ:TMUS) and Sprint (S) have announced that the two cell companies intend to merge in a deal worth $26 billion. The value of the combined company would be in the neighborhood of $146 billion. This would combine the nation's #3 and #4 carriers to create a stronger #3. Verizon (VZ) is the biggest carrier with rival AT&T (T) slightly behind. The newly combined entity would retain the T-Mobile name and would put 127 million customers under one proverbial roof.

The terms of the deal are a bit complex, but as an all-stock deal, it would avoid costly tax implications. T-Mobile will exchange 9.75 Sprint shares for 1 T-mobile unit. Deutsche Telekom will control 42% of the combined unit while SoftBank (which controlled 85% of Sprint stock going into the deal) will control 27% of the new entity. With the stakes of the two big institutional players figured out, that leaves 31% of the stock available to the public.

This deal has been rumored for quite some time, but the players involved never seemed to be able to get it across the finish line. With the marriage finally seeming to be set, all that is left is approval by U.S. regulators. Investors should not expect that to be an easy task. Look for Sprint and T-Mobile to argue that the deal will help the company build out a robust 5G LTE network that is the next step in the world of cellular. The companies will also likely argue that the scale and size of their main competitors makes it difficult for the smaller carriers to compete. Verizon and AT&T both sport market caps above $200 billion. Verizon has 149 million customers, and AT&T boasts 134 million.

If one looks at some of the metrics, you can see why these two getting

This article was written by

Spencer Osborne profile picture
Spencer Osborne assesses equities in a data supported realistic manner that is often missing in analysis that the average retail investor receives. His analysis is what investors NEED to hear rather than what they WANT to hear. He believes that the foundation of an equity price is based on what is probable rather than what is possible, and the trade focuses on possible near term catalysts and news. Smart investing is understanding how the market works and how that market mentality impacts a given equity. Spencer believes that investors should model their expectations and maintain a critical eye on whether those expectations are being met. If an invesor finds herself making excuses for missing the mark, then they are losing objectivity.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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