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Is T-Mobile’s Merger with Sprint Imminent?

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Recent reports suggest that the DoJ (Department of Justice) could soon approve T-Mobile’s (TMUS) and Sprint’s (S) $26.5 billion merger. CNBC reported, “The U.S. Department of Justice will on Thursday announce its approval of the $26 billion merger deal between T-Mobile and Sprint conditional on the sale of certain wireless assets to Dish.”

CNBC added that Dish Network (DISH) is set to purchase T-Mobile’s and Sprint’s wireless assets for about $5 billion, paying $1.4 billion for prepaid mobile and $3.6 billion for spectrum licenses. In June, Dish was planning to pay at least $6 billion for the wireless assets Sprint and T-Mobile are divesting to get their deal approved.

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Merger concerns

As the Dish deal would mean that there would still be four major wireless service providers in the US, the DoJ could approve the T-Mobile–Sprint merger. However, the deal still faces challenges. In June, 14 state attorneys general filed a suit to stop the merger. In May, the companies won approval for their tie-up from the Federal Communications Commission.

T-Mobile–Sprint merger synergies

The T-Mobile–Sprint tie-up could result in cost synergies, boost employment, reduce prices, and enhance the companies’ 5G networks. The deal would also improve their competitive position against the top two US wireless carriers, AT&T and Verizon. The combined company expects to generate about $43 billion in cost synergies.

T-Mobile is set to report its second-quarter results today. It expects to report adjusted EPS of $0.97 on revenue of $11.1 billion. To learn more, read T-Mobile: What to Watch in Its Q2 Earnings. Sprint expects to report adjusted EPS of -$0.04 on revenue of $8.1 billion.

Analysts’ recommendations

Of the 19 analysts covering Sprint stock, 14 recommend “hold,” two recommend “buy,” and three recommend “sell.” Their average 12-month target price of $6.27 implies an 18.1% fall from its July 24 price of $7.66. In comparison, 18 of the 21 analysts tracking T-Mobile stock recommend “buy.”

Dish Network stock fell 3.9% and closed at $41.56 on Wednesday. Meanwhile, T-Mobile stock rose 3.2% to $80.61, and Sprint stock rose 8.0% to $7.66.

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