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Will T-Mobile-Sprint Merger Have Better Financials than Expected?

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Dec. 14 2018, Updated 8:10 a.m. ET

Cowen says T-Mobile and Sprint merger could go through by middle of next year

Both T-Mobile (TMUS) and Sprint (S) have high hopes that their proposed merger will pass the regulatory hurdle. The companies have argued that they need this merger to speed up 5G network development and provide meaningful competition to Verizon (VZ) and AT&T (T). The merger is also expected to help it achieve cost synergies. They have also argued that since cable companies such as Comcast (CMCSA) and Charter (CHTR) have started to offer wireless services, there will be no dearth of competition in the telecom industry even if the merger goes through.

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According to FierceWireless citing Cowen, it expects the merger to go through by the middle of next year. It also expects the merged company to achieve faster growth and better cost synergies than the company itself predicted. The report said, “Sprint and T-Mobile management teams have promised roughly $6 billion in ‘run-rate synergies,’ but the Cowen analysts said that figure is likely ‘conservative’ and that the combined company will generate $8.95 per share in free cash flow by 2023.”

Although Cowen is quite optimistic about the merger, it will not be easy for T-Mobile and Sprint to convince regulatory authorities. These companies tried merging before in 2014 when the Obama administration rejected this proposal. Even last year, these companies started discussing the merger, but these talks collapsed due to the issue of ownership of the combined entity.

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