Sprint and T-Mobile Inch Closer to $32 Billion Merger Deal
Published on: 5th Jun 2014
Sprint and T Mobile are said to be much closer to announcing their long expected intention to merge their two US mobile networks.
Various reports suggest that Sprint has agreed to pay US$40 per share, valuing T-Mobile USA at around USD32 billion, and a 17 percent premium on its shareprice at yesterday's close.
Deutsche Telekom, which owns 67% of T-Mobile is said to have agreed to the deal.
The negotiations are now just hinging in Sprint/Softbank securing the funding and the sides agreeing on the breakup fee if regulators block the deal.
The break-up fee could be the critical issue as US regulators are already expressing concerns about further consolidation in the market, and the regulatory concessions are likely to be substantial.
If the regulators block the deal, then T-Mobile will want to walk away with a hefty compensation package. As it did when the merger with AT&T was also blocked last year.
There is also a question about Deutsche Telekom's stake. Under a shareholder agreement when T-Mobile merged with MetroPCS, Deutsche Telekom can only sell its 67% stake as a single trade. However, some reports suggest that it might be selling only a partial stake, and would keep up to 20 percent of the enlarged company.
There is still a lot of work to be done before a deal is announced, but the persistent chatter and rumours now mean that such an announcement is more of a when than an if.
It could see the US market effectively consolidated into three main players -- AT&T, Verizon and T-Mobile/Sprint.