Sprint or T-Mobile: An Easy Call Ahead of Deal

Sprint and T-Mobile US have moved one step closer to the altar. But as they don their wedding finery, one looks more attractive than the other.

The deal's chances of regulatory approval look dim -- with far worse implications for Sprint than for T-Mobile. Regulators have been explicit in expressing opposition to a merger. And while one Federal Communications Commission member, Jessica Rosenworcel, has reportedly indicated she will keep an open mind on it, steep Justice Department skepticism remains. Considering the high probability of rejection, investors must weigh Sprint's value as a stand-alone company against the value of touted deal synergies, perhaps more than $3.5 billion annually, UBS estimates. Sprint trades at 9.3 times calendar 2014 earnings before interest, taxes, depreciation and amortization -- against 7.8 times for T-Mobile -- and has been losing subscribers to competitors. Sprint's revenue is expected to fall for the next two fiscal years. If it remains a spinster and its multiple falls to, say, seven times, its stock could tumble to around $6 from today's $9 and change.