The boards of T-Mobile and Sprint have put the finishing touches on a massive merger agreement that values the combined company at $146 billion.
T-Mobile USA chief executive officer John Legere made the announcement by tweeting a seven-minute video breaking down the merger, while also including a link to a website further explaining the combination. Deutsche Telekom owns two-thirds of T-Mobile, and will control the newly formed firm.
Legere will be CEO of the combined entity, which will keep the T-Mobile name, and have headquarters located in both Bellevue, Wash. and Overland Park, Kan.
The deal, which will combine the third- and fourth-largest US wireless carriers, is expected to come under serious scrutiny from antitrust regulators. For evidence of that, one need not look further than how fervently the Trump administration has opposed AT&T’s proposed mega-acquisition of Time Warner.
It marks the culmination of four years of on-again, off-again discussions between T-Mobile and Sprint — and serves as the third time the two rivals have tried to merge.
With 127 million customers between them, the two newly teamed firms are expected to compete directly with Verizon— the nation’s number one carrier — and second-place AT&T.
“This isn’t a case of going from 4 to 3 wireless companies — there are now at least 7 or 8 big competitors in this converging market,” Legere argued on Sunday.
The agreement involves T-Mobile exchanging 9.75 Sprint shares per unit of T-Mobile. Deutsche Telekom will own 42% of the combined company, while SoftBank — which controls 85% of Sprint — will own 27%. The remaining 31% will be held by the public.
Sprint and T-Mobile discussed a potential deal in November 2017, but talks broke down amid disagreement over who would control the new company. A Wall Street Journal report suggests that SoftBank founder Masayoshi Son may have since become more willing to give up control amid mounting pressure on Sprint to roll out 5G technology.
“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could on its own,” Legere said in an official statement. “We intend to bring this same competitive disruption as we look to build the world’s best 5G network that will make the US a hotbed for innovation and will redefine the way consumers live and work across the US, including in rural America.”
The all-stock transaction values Sprint at 0.10256 per T-Mobile share, or $6.62 a share, based on T-Mobile’s last closing price. That valued Sprint at around $26 billion. T-Mobile had a market value of $55 billion as of Friday’s close, and the two companies have roughly $60 billion of combined debt.
Sprint’s stock has surged 26% since the Wall Street Journal reported on April 10 that the two companies had rekindled merger talks, while T-Mobile’s has risen 8% over the same period.
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