T-Mobile–Sprint Merger Faces More Uncertainty

Today brought a big update for the T-Mobile–Sprint merger. T-Mobile (TMUS) received regulatory approval from the US Department of Justice to acquire Sprint (S) for $26.5 billion. But the merger still faces some challenges.

The DOJ officially approved the deal after the companies agreed to create a new mobile carrier by selling wireless assets to Dish Network (DISH). The merger would consolidate the third- and fourth-largest US mobile carriers. The combined company is expected to have an enterprise value of about $160 billion.

CNBC reported, “As part of the agreement, Sprint will divest its Boost Mobile, Virgin Mobile and Sprint prepaid phone businesses. Sprint and T-Mobile will divest some of their wireless spectrum to Dish Network and make at least 20,000 cell sites and hundreds of retail stores available to the company.” CNBC added, “Dish will also be able to access T-Mobile’s network for seven years.”

T-Mobile–Sprint merger concerns

The T-Mobile–Sprint merger still faces challenges. In June, 14 state attorneys general filed a lawsuit to block the transaction. The lawsuit alleged that the merger could harm competition in the wireless industry and raise costs for consumers. The deal may not close until the lawsuit resolves.

See T-Mobile: A Look at Q2 Results as It Awaits Merger Approval to learn more. Also check out Is T-Mobile’s Merger with Sprint Imminent?

T-Mobile–Sprint Merger Faces More Uncertainty

T-Mobile’s earnings and revenue

T-Mobile announced its second-quarter earnings results yesterday after the market bell. It reported adjusted EPS of $1.09, 12.4% higher than Wall Street’s estimate of $0.97. The company had reported adjusted EPS of $0.92 in the second quarter of 2018. T-Mobile’s revenue rose 3.9% year-over-year to $11.0 billion in Q2 of 2019. But it came in marginally lower than analysts’ estimate of $11.1 billion.

Analysts’ recommendations

As of July 26, per a Reuters survey of 21 investment research firms covering T-Mobile stock, 18 analysts recommend a “buy” Three recommend a “hold,” and none recommend a “sell.” Their average 12-month target price of $84.44 implies a 5.7% rise from the July 25 closing price of $79.91.

Today, Citigroup increased its target price on T-Mobile from $83 to $92. Cowen and Company also raised its target price on the stock from $82 to $93.

TMUS returns

On July 26 as of 2:25 PM ET, T-Mobile stock was up 5.1% at $83.98, Sprint stock was up 7.4% at $8.00, and Dish stock was up 0.8% at $39.49.

Year-to-date as of July 25, T-Mobile stock was up 25.6%. Meanwhile, Sprint was up 27.8%. Stay tuned for more in-depth analysis of the T-Mobile–Sprint merger.