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Why T-Mobile and Sprint Merger Odds Reach 50%

Ambrish Shah - Author

Aug. 9 2019, Updated 10:33 a.m. ET

T-Mobile (TMUS) and Sprint (S) announced the proposed merger in April 2018. So far, the merger has been delayed. Currently, the companies face a trial in court. A group of state attorney generals filed a lawsuit against the merger.

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T-Mobile and Sprint merger lawsuit

On August 1, the Texas attorney general joined the lawsuit opposing the T-Mobile–Sprint merger. The court also rescheduled the trial’s start date from October 7 to December 9. Notably, the T-Mobile–Sprint merger might not close until the lawsuit concludes.

Keith Snyder, a CFRA analyst, thinks that the merger has a 50% chance of going through. The percentage is due to the new hearing date and the inclusion of Texas, a Republican state, in the lawsuit.

According to a FierceWireless report, the uncertainty and delays tied to the T-Mobile–Sprint merger are worse for Dish Network (DISH) and Sprint than for T-Mobile. The report stated that “T-Mobile is going full steam ahead and executing on its plans, and doing well while doing so. Sprint, as one would expect with any company being bought, is having difficulty executing and can’t attract talent and invest long-term as long as the deal is pending.”

The report also said, “Dish wishes to proceed in a new direction, but the longer it takes the terms of its deals with T-Mobile and the FCC to be finalized, the more difficult it is for Dish to make the investments necessary to succeed in its wireless efforts.”

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Factors working against the deal

The lawsuit alleges that the T-Mobile–Sprint merger could reduce competition and raise prices for wireless customers. The merger would reduce the number of major US national wireless carriers from four to three.

T-Mobile and Sprint would benefit from the merger

The proposed merger will likely benefit Sprint. The company has been losing its postpaid phone customers for the past several quarters. In the June quarter, Sprint lost net 128,000 postpaid phone subscribers, while T-Mobile gained 710,000 postpaid phone subscribers. T-Mobile thinks that the potential merger with Sprint will enable it to rapidly launch a nationwide 5G network. If the merger goes through, Sprint and T-Mobile will invest up to $40 billion in network improvements. The combined entity would create a stronger company to take on telecom giants like AT&T (T). AT&T added 72,000 postpaid phone net subscribers in the second quarter.

Deutsche Telekom, T-Mobile’s parent company, stated that it expects the T-Mobile–Sprint merger “to generate $43 billion in cost savings even after tweaking the deal to secure antitrust clearance.”

The Department of Justice approved the deal after T-Mobile agreed to divest Sprint’s prepaid business to Dish Network to create a fourth US mobile operator.

On Thursday, AT&T stock rose 1.41% and closed at $34.54, while Sprint stock rose 1.78% to $6.85. Likewise, T-Mobile stock rose 1.86% to $77.90.


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