Sprint, T-mobile agree to merger
Deal would cut field to three major players
NEW YORK — T-mobile and Sprint reached a $26.5 billion merger agreement Sunday that would reduce the U.S. wireless industry to three major players if the Trump administration’s antitrust regulators let the deal go through.
The nation’s third- and fourth-largest wireless companies have been considering a combination for years, one that would bulk them up to a similar size as industry giants Verizon and AT&T. But a 2014 attempt fell apart amid resistance from the Obama administration.
The combined company, to be called T-mobile, would have about 127 million customers. Consumers worry that a less crowded telecom field could result in higher prices, while unions are concerned about potential job losses.
In a conference call with Wall Street analysts, Sprint CEO Marcelo Claure acknowledged that getting regulatory approval is “the elephant in the room,” and one of the first things the companies did after sending out the deal’s news release was to call Ajit Pai, chairman of the Federal Communications Commission.
The companies stressed that they plan to have more employees following the combination, particularly in rural areas, than they do as stand-alone companies now.
They also emphasized that the deal would help accelerate their development of faster 5G wireless networks and ensure that the U.S. doesn’t cede leadership on the technology to China.
They said the combination
MERGER
would allow them to better compete not only with AT&T and Verizon but also with Comcast and others as the wireless, broadband and video industries converge.
“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,” T-mobile chief executive John Legere said in a statement. He would be the CEO of the combined company.
The all-stock deal values each share of Sprint at slightly more than 0.10 T-mobile shares. Deutsche Telekom, T-mobile’s parent, would own about 42 percent of the combined company. Japan’s Softbank, which controls Sprint, would own 27 percent, and the remainder would be held by the public. The companies said they expect the deal to close by the first half of 2019 and would result in about $6 billion in annual cost savings.
Investors have been anticipating a deal like this for some time. In addition to the thwarted attempt three years ago, the two companies were poised to combine in October, but the deal was called off after what analysts said was a disagreement over control of the combined company.
The deal will have to be reviewed by the Justice Department and the FCC.
National carriers had not been able to get a deal through under President Barack Obama. But the FCC in September deemed the wireless market “competitive” for the first time since 2009, which some analysts say could make it easier to present a deal.
The 5G aspirations are at the heart of the agreement, and the new technology could allow companies to provide faster service to people’s homes.
Sprint’s Claure likened going from 4G to 5G to switching from blackand-white television to color. The combined company plans to invest up to $40 billion in its network in the first three years, which executives said would drive more hiring and better service for customers.
Sprint has a lot of debt and has posted a string of annual losses. It has cut costs and made itself more attractive to customers, BTIG Research analyst Walter Piecyk said, but it hasn’t invested enough in its network and doesn’t have enough airwave rights for quality service in rural areas.