Lowest Sprint/T-Mobile merger odds hit Wall Street on closing arguments day

Lowest Sprint/T-Mobile merger odds hit Wall Street on closing arguments day
As if we needed one more indication that fate may be souring on the now-$34 billion merger of Sprint and T-Mobile, the invisible hand of the stock market is now signaling troubles ahead, too. 

When the potential merger of T-Mobile with Sprint was first announced, some on Wall Street gave it a 40% chance to actually happen. When we followed with tangential FCC checks, the probability was brought up from 60% to 70% by financial analysts, rising up to 90% at Oppenheimer even, which basically meant that it is a done deal.

Meanwhile, however, the details about the prepaid Metro, Boost and Virgin brands divestment to the likes of Dish were disclosed, and, just when this looked like the last hurdle to be passed for the merger to take place, with the FCC and DOJ both on board, a lawsuit came in.

In it, a number of state attorneys claim that the resulting New T-Mobile entity will hurt competition, shed jobs and raise prices, with quite a bit of success so far in court, and closing arguments due today, with U.S. Judge Victor Marrero passing a verdict in the couple of weeks afterwards. 

In fact, the lawsuit is one of the main reasons that Wall Street is souring on the merger, indicated by the current record spread between the Sprint and T-Mobile stock prices on closing Tuesday. Sprint ended at $4.80 a share, which is a 40% discount over the price that T-Mobile's merger deal proposed, according to the Wall Street Journal. Big Magenta's stock is doing very well, thank you, what with a million more postpaid subscribers added in the last quarterly results statement.


Sprint, on the other hand, keeps bleeding subs, and during the trial testified that it is having to deal with an "inferior" network that leads it into a Catch 22 when it comes to subscriber churn and mounting losses. While every side exaggerates in a trial, Sprint's chances for survival without the T-Mobile deal aren't great according to Wall Street's stock price spread. 

The state AGs argument that Sprint could pull off a T-Mobile in a few years when left to its own devices doesn't seem very rational on its face, too. All that is left now is to wait for the closing argument today, and then for the final verdict in a few weeks' time which can stretch the wait into April still.

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3 Comments

1. Galen20K

Posts: 582; Member since: Dec 26, 2008

Sprint is dead, no matter the outcome of this........ thus leading to three major carriers anyway. it only seems logical to strengthen the smaller of the three bigger ones to better support higher chances of "meaningful" competition, rather than continually keeping Verizon/Att at such a crazy unfair advantage to anybody else on the market. a nearly even level "New" T-Mobile would definitely give Verizon/Att a run for its money, that's the reason both of them have been trying to buy political opponents to the deal(which seems to be working)). this entire situation is ridiculous and bogus.

2. Eclectech

Posts: 360; Member since: May 01, 2013

Rumors of Sprint's demise are greatly exaggerated. Sure they'll make cuts (maybe even find another merger partner) but considering they are owned by Softbank, I wouldn't run out to buy a casket.

3. harrisvt

Posts: 22; Member since: Nov 10, 2015

Yeah with their 40 billion or so debt load and shrinking subscriber base I think your too optimistic. People forget tmobile got a several billion dollar break up fee that let them invest in their network. Tmobile wasnt even in near the bad shape sprint is in. Word of mouth has given a horrible reputation that would take many years to undo before they could even become profitable. Could Softbank bail them out? Sure they have deep pockets. But why would they? If you speak strictly from an roi perspective they would never recoup that investment. They clearly want to unload sprint anyway possible.

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