Money is the one big thing standing in the way of the T-Mobile/Sprint merger

Money is the one big thing standing in the way of the T-Mobile/Sprint merger
The Department of Justice gave its blessing more than six months ago, the Federal Communications Commission followed suit with a predictable party-line vote in October, and despite some pretty strong arguments made by 14 state AGs and the Attorney General for the District of Columbia, a federal judge also signed off on the combination of T-Mobile and Sprint earlier this week after considering Magenta's "maverick" reputation, the Now Network's faltering business, and perhaps most importantly, Dish's industry ambitions.

But although T-Mobile's little victory lap on Tuesday seemed to strongly suggest the $26.5 billion merger was finally a done deal, that's not the case just yet. Even the "Un-carrier" made it clear the birth of a "New T-Mobile" network remains subject to "possible additional court proceedings" and "satisfactory resolution of outstanding business issues among the parties."

In line with recent rumors, there's no official word on the aforementioned coalition of states opposing the mega deal preparing to file an appeal, while the Washington review of the DoJ's approval process still feels like a formality unlikely to pose a real problem, despite dragging on for so long. That essentially leaves the "outstanding business issues among the parties" as the only serious hurdle that needs to be cleared before the merger is completed once and for all.

Further delays are definitely on the table

While it was obvious from the get-go the consolidation of the US wireless industry would face tough political opposition and lengthy regulatory scrutiny, we're fairly certain T-Mobile and Sprint never anticipated this April 2018-started saga would go on for a whole two years. Current COO and future CEO Mike Sievert expressed his confidence on the heels of the February 11 court ruling that the merger will be closed "as early as April 1, 2020", which would make for a sweet and fitting parting gift for John Legere.

But according to inside sources cited by the Financial Times today, T-Mobile US parent company Deutsche Telekom is looking to go back to the negotiating table and seek a significant price cut in a move bound to protract the conclusion of the two-year (for now) saga.

If the renegotiation takes place, this will find T-Mo in a stronger position than back in 2018 when it comes to subscriber numbers and recent growth trends. But although Sprint is in a financial bind, desperately needing a savior on a white horse, the SoftBank-owned operator could still afford to play hardball, knowing full well Deutsche Telekom has no intention to kill the deal as T-Mobile's future 5G advancements depend in large part on Sprint's essential mid-band spectrum.

No words on numbers or actual dates

It's hard to quantify how valuable Sprint might prove to be for T-Mobile in the long run, but right now, the brand, its customer base, and spectrum are objectively worth much less than two years ago. Specifically, FT reports Sprint shares are trading at a 12 percent discount compared to the "implied value" of the mega deal, vastly improving from an all-time low discount of 45 percent prior to Judge Marrero's somewhat controversial verdict while still leaving plenty of room for revision.

Interestingly, analysts consider the deal was "overly generous from the beginning" on T-Mobile's part, so it remains to be seen if the "Un-carrier's" Germany-based owners will exhibit a similar degree of generosity in their bid to finalize the merger with minimal delay. In other words, the industry expectations are that the deal will close at an ever so slightly lower price than the one agreed on in 2018, thus potentially satisfying both parties.

Of course, we'll have to wait until the new talks are concluded (or at least confirmed) to get an estimate on the revised merger price and closing date. For the time being, analysts are wary of making predictions of that sort.


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