T-Mobile, Sprint combine in $26.5 billion merger

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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.

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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.

source: T-Mobile

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