Sprint, T-Mobile Agree to $26 Billion Merger

The boards of Sprint and T-Mobile US struck a $26 billion merger that, if allowed by antitrust enforcers, would leave the US wireless market dominated by three national players. Under the terms of the deal, T-Mobile will exchange 9.75 Sprint shares for each T-Mobile share. T-Mobile parent Deutsche Telekom will own 42% of the combined company and Sprint parent SoftBank Group will own 27%. The remaining 31% will be held by the public. Deutsche Telekom would also control voting rights over 69% of the new company and appoint nine of its 14 directors. The combined company, which would be called T-Mobile, would be run by T-Mobile CEO John Legere. 

Joining the nation’s third- and fourth-largest wireless carriers would create a wireless provider with nearly 100 million cellphone customers, second only in the US to Verizon. The all-stock deal would combine Sprint, which has a market value of $26 billion, with T-Mobile, which has a market value of $55 billion. The two companies also have about $60 billion of combined net debt. The combined company would have about $74 billion in annual revenue.

“Telecom is a scale business,” said Blair Levin, a policy adviser for the analysis firm New Street Research. “There are huge advantages of scale, and T-Mobile and Sprint have been carrying the cost of a network over a much smaller number of customers.”

The companies must overcome myriad political hurdles — including consumers’ heightened skepticism about the rapid pace of consolidation in the media and telecom industries. From President Trump to Sen. Elizabeth Warren (D-MA), policymakers recently have sounded off against these deals and may train their fire soon on T-Mobile and Sprint’s latest gambit. The Federal Communications Commission and the Justice Department — which will review the newly formalized merger to ensure it protects consumers and competition — declined to comment.

Some analysts say the government’s argument for opposing such a merger in 2014 since has proved correct. Preventing consolidation paved the way for T-Mobile to launch its Uncarrier campaign to reshape the wireless industry, said Craig Moffett, a telecom analyst at the research firm MoffettNathanson. The result has been lower prices and more consumer-friendly business practices, such as the end of long-term customer contracts. “The DOJ’s decision to block the transaction has been validated in every conceivable way,” Moffett said. “T-Mobile has not only survived — it has thrived. The market has become more competitive. Consumers have unambiguously benefited from the DOJ’s decision. That poses a problematic backdrop for this merger.”

The companies said they hope to close the deal in the first half of 2019.