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Sprint and T-Mobile have finally reached a merger agreement, which means if approved by regulators, two of the four major carriers in the United States will combine into one entity in an all-stock deal worth billions.
The new combined company will be named T-Mobile and current T-Mobile CEO John Legere will serve as the Chief Executive Officer. Sprint and T-Mobile say the company will be a “force for positive change” in the U.S. wireless, video, and broadband industries, supercharging T-Mobile’s Un-carrier strategy and allowing the new company to “lead in the 5G era.”
The New T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G. The new company will be able to light up a broad and deep 5G network faster than either company could separately.
T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.
According to the terms of the deal, T-Mobile plans to exchange 9.75 Sprint shares for each T-Mobile share. Deutsche Telekom, T-Mobile’s parent company, will own 42 percent of the combined company and SoftBank, Sprint’s parent company, will own 27 percent. Deutsche Telekom will have voting rights over 69 percent of the new company and will appoint nine of its 14 directors, while Sprint will appoint four.
T-Mobile CEO John Legere said that the combined company will “create a fierce competitor” that’s able to “deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience,” while current Sprint CEO Marcelo Claure, who will serve on the board of the new company, said that the merger will make the U.S. a “hotbed for innovation.”
“We intend to bring this same competitive disruption as we look to build the world’s best 5G network that will make the U.S. a hotbed for innovation and will redefine the way consumers live and work across the U.S., including in rural America. As we do this, we will force our competitors to follow suit, as they always do, which will benefit the entire country. I am confident this combination will spur job creation and ensure opportunities for Sprint employees as part of a larger, stronger combined organization, and I am thrilled that Kansas City will be a second headquarters for the merged company.”
Along with the faster rollout of 5G technology, Sprint and T-Mobile say the merger will lead to job creation, lower prices for consumers, improved coverage, and “unprecedented network capacity.”
The deal between Sprint and T-Mobile still needs to be approved by antitrust regulators in the United States, but if it goes through, the U.S. will have three major carriers rather four. The combined Sprint and T-Mobile company will have nearly 100 million customers, putting it second only to Verizon.
Sprint and T-Mobile are aiming to close the deal “no later” than first half of 2019. More information about the merger can be found in the press release and in a new “All for 5G” website the two companies have created.
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Sprint and T-Mobile, after years of going back and forth as to whether they are going to tie up two of the largest telecom providers in the U.S., have announced that the two companies have entered a merger agreement this morning.
The merger will be an all-stock transaction, and will now be subject to regulatory approval. That latter part is going to be its biggest challenge, because it will not only tie up the No. 3 and No. 4 carriers into the U.S. into a single unit, but also that international organizations hold significant stakes in both companies. Softbank controls a majority of Spring, while Deutsche Telekom controls a significant chunk of T-Mobile. Following the administration’s intervention in the Broadcom-Qualcomm takeover attempt, it isn’t clear what will actually go through in terms of major mergers these days.
Bloomberg is reporting that Deutsche Telekom will have 42% ownership of the combined company, while SoftBan will own around 27% of the company.
As expected, the argument here is for the expansion of 5G networks as plans for that start to ramp up. T-Mobile argues in its announcement that it will help it be competitive with AT&T and Verizon as telecom companies start to roll out a next-generation 5G network, though it does in the end remove a carrier choice for end consumers in the U.S..
“The New T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G,” T-Mobile said in a statement as part of the announcement. “The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.”
Both companies appeared to be finalizing the deal on Friday, when they set valuation terms and were preparing to announce the merger today. The deal values Sprint at an enterprise value of around $59 billion, with the combined company having an enterprise value of $146 billion. AT&T has a market cap of around $214 billion, while Verizon has a market cap of around $213 billion, as of Sunday.
The transaction, the companies said, is of course subject to regulatory approval. But, pending approval, it is expected to close “no later than the first half of 2019.”
Disclosure: Verizon is the parent company of Oath, which owns TechCrunch.
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It looks like a potential merger deal between T-Mobile and Sprint, two of the major telecom companies in the U.S., is getting closer and now has set valuation terms, according to a report by Bloomberg.
The deal could be announced as soon as Sunday, according to a report by CNBC. The proposed tie-up of the two companies was called off in November last year, but now that deal appears to be coming closer, with T-Mobile’s backer valuing Sprint at around $24 billion, according to Bloomberg. As part of the deal, Deutsche Telekom AG will get a 69% voting interest on a 42% stake in the company, according to that report. (Both reports, however, disagree on the valuation — with CNBC citing a $26 billion valuation.)
This deal seems to have been a long time coming, and consolidates two of the four major telecom providers in the U.S. into one larger entity. That could, in theory, offer it some more flexibility as they expand into 5G networks. Still, a deal of this scale could still fall apart and would be subject to regulation — with significant international ownership of both companies (Softbank for Sprint, and Deutsche Telekom for T-Mobile).
Sprint shares fell more than 8% in extended trading to under $6, while T-Mobile shares were largely unchanged. Shares of Sprint were up around 8% on the day up to $6.50 in early trading.
A representative from Sprint declined to comment. A representative from T-Mobile did not immediately respond to a request for comment.
Earlier this month, reports suggested Sprint and T-Mobile had once again resumed merger talks, and now it appears the two U.S. carriers may be close to inking a deal.
According to Reuters, Sprint and T-Mobile have “made progress” negotiating merger terms and are aiming to complete deal talks as soon as next week.
T-Mobile parent company Deutsche Telekom and Sprint parent company SoftBank are said to be discussing an agreement that would “dictate how they exercise voting control over the combined company.”
This could allow Deutsche Telekom to consolidate the combined company on its books, even if it does not have a majority stake in the combined company, one of the sources added. Deutsche Telekom owns more than 63 percent of T-mobile, while SoftBank owns 84.7 percent of Sprint.
Previous merger talks between Sprint and T-Mobile failed after the two companies were unable to reach “mutually agreeable terms.” Sprint parent company SoftBank was said to be unsatisfied with the deal because of ownership terms, with SoftBank concerned about losing control of the combined company after Deutsche Telekom requested a controlling stake.
If T-Mobile and Sprint are able to establish a satisfactory deal, the combined company would have more than 100 million customers.
Sources that spoke to Reuters said there is “no certainty” a deal will be reached, given the dissolution of the previous merger talks.
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