Sprint T-Mobile Merger: A Look At Some Of The Recent Developments

T-Mobile (NASDAQ:TMUS) recently indicated that its proposed merger with Sprint (NYSE:S) could close by as early as Q1 2019, although it noted that Q2 remained more likely. Below we take a look at some of the recent developments relating to the $26 billion deal, which was first announced in April.

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Updates On FCC And DOJ Process

The merger between the two companies needs to be approved by both the U.S. Department of Justice as well as the Federal Communications Commission.  The FCC typically has an informal period for the review of mergers, which it refers to as a shot clock. While the T-Mobile and Sprint deal has a 180-day shot clock, it was paused in early September, as the companies submitted new economic and engineering models that the agency needed to closely review. The clock will now resume on Dec. 4, counting from day 55.  Separately, the companies have noted that the deposition with the Department of Justice, which is the last remaining step of the merger had already started and is expected to be completed within a few weeks.

How The Companies Have Been Presenting Their Case To Regulators

The two carriers have been using multiple narratives to sell their merger to regulators. Firstly, they are indicating that the deal would be positive for U.S. wireless customers, as it creates a stronger rival to market leaders Verizon and AT&T. For instance, Sprint’s CEO previously indicated that the merger would lower costs for subscribers, with the two companies estimating upwards of $6 billion in cost synergies, which could partly be passed on to customers.

The two companies are also arguing that their merger would help the U.S. push forward with the deployment of next-generation 5G networks, noting that the combined assets of Sprint and T-Mobile could create 8x the 5G capacity that either company could do on a standalone basis, at 15 times the speed. Sprint has a deep portfolio of low-band spectrum that could be used for 5G, while building a joint network would enable the companies to reduce CapEx spends meaningfully.

Separately, Sprint is also pointing to its tough financial condition to win regulatory approval. The company has made presentations to the FCC painting a grim picture of its business, which it says is unable to “turn the corner”, likely indicating to regulators that it would need the merger to go through to remain viable. The company noted that it was unable to improve its cash flows because of high subscriber defections and churn, which are forcing it to offer aggressive promotions (related: Why Sprint Is Painting A Grim Picture Of Its Business To Regulators).

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