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Sprint, T-Mobile Jumped after DoJ Approved Merger

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On July 26, mobile carriers Sprint (S) and T-Mobile US (TMUS) finally received the much-awaited approval of the DoJ (US Department of Justice) for their $26.5 billion merger. The combination of T-Mobile and Sprint will have an enterprise value of roughly $160 billion. In addition to the Sprint–T-Mobile merger approval, Dish Network (DISH) became the fourth wireless service provider in the US.

T-Mobile and Sprint, the US’s third- and fourth-largest wireless providers, respectively, announced their merger in April last year. Since then, the telecom companies have been trying hard to push the deal through. US regulators and several other state generals were against the merger, as they were concerned that it would end competition and harm consumers via higher costs.

Following the announcement, Sprint and T-Mobile stocks surged 7.5% and 5.4%, respectively, on July 26. Both companies also hit new 52-week highs of $8.06 and $85.22, respectively. Dish Network gained as much as 3.5%.

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T-Mobile and Sprint divested assets

T-Mobile and Sprint have already divested many of their premium assets to satisfy the FCC (Federal Communications Commission) as well as the DoJ’s antitrust division. The DoJ wanted the companies to create a fourth wireless carrier to protect competition. Currently, there are four US wireless networks: Verizon, AT&T, T-Mobile US, and Sprint.

The mobile carriers sold their valuable Boost Mobile and Virgin Mobile prepaid brands and also sold 800 MHz spectrum to Dish Network for $5 billion. Sprint had a prepaid base of around 8.8 million in the fourth quarter of fiscal 2018 (which ended on March 31), whereas T-Mobile had about 21.1 million prepaid customers at the end of March.

T-Mobile and Sprint also gave Dish Network access to some of their stores and networks. The acquisition of T-Mobile’s assets will make Dish Network a viable wireless carrier and should allow it to sell wireless phone services.

T-Mobile and Sprint also agreed to the FCC’s terms in May to get merger approval. The companies decided to build 5G infrastructure in maximum rural areas and maintain lower prices for its customers for at least three years.

T-Mobile and Sprint merger still needs states’ approval

The FCC and DoJ have agreed to the merger terms, but the companies still require the support of the states. In June, a dozen state attorneys general filed a lawsuit to block the merger on worries that it would cost more than $4.5 billion annually to its subscribers. The state generals also believe that it would harm competition and would result in massive job losses.

However, according to Sprint’s chair, Marcelo Claure, the states will approve the merger. The company will convince the states that the merger will bring significant value and won’t disrupt the competitive environment. T-Mobile’s CEO, John Legere, is also confident that the states will join the DoJ and FCC in supporting the merger. The DoJ has also discussed support of the deal with the states, according to the Wall Street Journal.

T-Mobile and Sprint expect the deal to close in the second half of this year. However, the merger won’t close until the states give their approval and resolve the case. The trials will begin on October 7, but the date could reportedly shift to December.

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