Sprint T-Mobile Merger: Overview Of Some Of The Recent Developments

by Trefis Team
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The planned merger between wireless carriers Sprint (NYSE:S) and T-Mobile (NASDAQ:TMUS), which was announced in late April 2018, continues to be reviewed by regulators. Below we take a look at some of the recent developments relating to the $26 billion deal.

What Is The Status Of The Deal?

In late April, the two companies extended the deadline for completing the merger by about three months to July 29, as the merger is still pending approval from both the Federal Communications Commission as well as the  U.S. Department of Justice, which are investigating the impacts of the merger on consumers. Sprint – the carrier which has more to benefit from the merger –  is currently seeing its stock trade at $6 per share versus the merger value of $7.50 per share, accounting for the 0.10256 swap ratio of  T-Mobile shares and T-Mobile’s current stock price of about $74. This could potentially mean that the markets still view the risks of a merger not going through as significant.

Prepaid Market Concerns

While the impact of the merger on U.S. wireless competition and pricing are key areas being studied by regulators, the prepaid market, in particular, appears to be a point of concern as it caters to more low-income customers. T-Mobile holds ~ 38% of the U.S. pre-paid market, while Sprint holds 16%, implying that the combined company could hold a market share of roughly 54% in the prepaid space, per S&P. However, Bloomberg reported that the companies are considering separating or potentially selling off their prepaid businesses as a concession to gain regulatory approval.

How The Carriers Are Selling The Deal To Regulators

The two companies have been arguing that the deal would create a stronger rival to market leaders Verizon and AT&T, helping, and not hurting, competition. The companies have also committed to not increase prices on their plans for three years. The companies have also argued that a deal would allow the combined entity to provide wider and faster 5G coverage, noting that they could also improve competition in the in-home broadband space. Sprint is also pointing to its tough financial condition to win regulatory approval, previously indicating that it was unable to “turn the corner” as a standalone company.

See our interactive dashboard analysis on How Has Sprint Fared In Recent Quarters And What To Expect In Q1 FY’19? You can modify our key drivers to arrive at your own estimates for the company’s revenues and EPS.

 

 

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