T-Mobile, Sprint combine in $26.5 billion merger
After all those years of teasing and flirting, T-Mobile and Sprint are finally getting married. Parental approval is required, of course. The $26.5 billion merger of the nation's third largest and fourth largest carriers will enable the combined company to better compete with Verizon and AT&T, the numbers one and two stateside wireless operators, respectively. The T-Mobile name will be used for the merged firm, and it will be led by T-Mobile's feisty John Legere, who will keep CEO duties. His right hand man, Mike Sievert, will keep the COO title. The chairman of T-Mobile parent Deutsche Bank, Tom Hoettges, will have that role at the merged company. SoftBank CEO Masayoshi Son will join the board. His company owns over 80% of Sprint.
Each Sprint share will be converted into 0.10256 of a T-Mobile share. Based on T-Mobile's Friday close, the transaction values Sprint at $6.62 a share. The stock closed regular NYSE trading at $6.50 on Friday. Deutche Telekom will own 42% of the combined carrier while SoftBank will own 27%. The remaining 31% will remain in public hands.
Both companies say that synergies of as much as $43 billion have been identified, and T-Mobile/Sprint had $74 billion in combined annual revenues last year. Verizon Wireless had $88 billion in revenue during 2017, while AT&T had $71 billion in revenue during the same time period. Based on the number of subscribers, AT&T would still be ahead of the combined T-Mobile/Sprint. At the end of the fourth quarter of last year, Verizon had 150.46 million subscribers followed by AT&T's 141.57 million. The combined T-Mobile/Sprint would have had 126.21 million customers at the end of 2017.
The next step is getting regulatory approval for the transaction and it isn't going to be easy. Outside of the fact that John Legere and Donald Trump had a digital run-in a few years ago, the FCC and DOJ put the kibosh on 2014 talks between the two even before a deal was announced. Last year, T-Mobile and Sprint had the outlines of a deal completed before SoftBank's Son allegedly decided to kill the deal. The executive supposedly was not happy with the percentage of ownership that SoftBank would be left with.
A report from brokerage firm Cowen issued last month revealed that had T-Mobile purchased Sprint last year, it was going to shut down 30% of Sprint's cell sites and employ the latter's high frequency 2.5GHz spectrum coast-to-coast.