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T-Mobile and Sprint Merger: What Could Happen?

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On Wednesday, one of the 17 states that sued to stop the T-Mobile (TMUS) and Sprint (S) merger deal agreed to opt out of the lawsuit. Mississippi left the multistate lawsuit.

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Mississippi supports T-Mobile and Sprint merger

Now, Mississippi supports the T-Mobile and Sprint merger. Mississippi Attorney General Jim Hood stated that the combined company agreed to some specific commitments that benefit the state. The commitments include:

  • network build commitment – statewide, rural, and county
  • in-home broadband commitment
  • low-price mobile plan commitment
  • broadband access for education commitment

Hood said, “The world around us is almost fully digital, but Mississippi is lagging behind with internet deserts across the state.” He also said, “My agreement with T-Mobile will help fill this gap, and I appreciate their commitments made specifically to Mississippi counties that lacked service. Access to the internet results in better access to education, jobs, and health care.”

Hood confirmed that there won’t be any retail job losses. The combined company will open new stores in rural areas. Hood thinks that only 2% of the Mississippi residents would have benefited from T-Mobile’s standalone 5G services.

Last week, Florida Attorney General Ashley Moody supported the proposed $26.5 billion merger deal between the two carriers. Meanwhile, South Dakota, Kansas, Nebraska, Ohio, Louisiana, and Oklahoma also support the merger.

Department of Justice approved the merger

In July, the Department of Justice approved the merger deal between T-Mobile and Sprint. The regulator cleared the deal on the condition that the new T-Mobile divests certain wireless assets to Dish Network (DISH) for $5 billion. The combined company will likely divest Sprint’s prepaid businesses, which include Boost Mobile and Virgin Mobile, and certain spectrum. Dish Network will likely be the fourth-largest wireless carrier in the US after the deal goes through.

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T-Mobile and Sprint haven’t received formal approval from the FCC. Last week, according to a Bloomberg report, the merger deal received majority support from the FCC. The report stated that three Republican commissioners on the five-member committee voted to approve the deal. However, the two Democrat commissioners haven’t cast their votes yet.

In September, the FCC accused Sprint of claiming federal subsidies for 885,000 low-income and inactive customers under the Lifeline program. Reportedly, a group of about nine organizations urged the agency to pause its review of the merger contract until the Lifeline investigation was completed.

T-Mobile and Sprint announced the merger in April 2018. Reportedly, the merger agreement will expire on November 1 unless both companies agree to extend the date. The combined company will likely achieve $43 billion worth of cost synergies.

T-Mobile and Sprint merger concerns

The T-Mobile and Sprint merger faces a multistate lawsuit due to antitrust concerns led by New York and California. Currently, about 16 states and the District of Columbia are trying to stop the merger. The lawsuit alleges that the merger could reduce competition and hike wireless prices for consumers. A court trial is scheduled in December.

A group of antitrust experts thinks that the court should block the Department of Justice’s approval of the T-Mobile and Sprint merger. According to a report from The Verge, “a group of seven economists and antitrust experts say the court should reject the DOJ’s proposed solution, calling it doom[ed] … to failure and a remedy that does not meet the standard of restoring the competition currently provided by Sprint.”

In a tweet on Thursday, a Fox reporter stated that more state attorneys general would follow Mississippi and opt out of the lawsuit to stop the merger deal.

As reported by LightReading, a Wells Fargo analyst said, “We may even see more states may drop out over the coming weeks, unless a settlement is reached with NY where this originated, there will be a case commencing in December.”

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Analysts’ estimates

Among the 20 analysts tracking T-Mobile, 16 recommend a “buy,” four recommend a “hold,” and none recommend a “sell.” Analysts have a 12-month average target price of $88.44 on the stock, which shows a potential upside of 13.0% from its last closing price.

Sprint and AT&T (T) are rated as a “buy” by one out of 18 and 14 of 28 analysts, respectively. Sprint’s target price of $6.81 implies an upside of 8.6%, while AT&T’s target price of $36.52 implies a downside of 2.4%.

Stock performance

On Thursday, T-Mobile stock closed 0.66% higher at $78.30. At this closing price, T-Mobile’s market cap stands at about $66.9 billion. The stock is trading 8.1% lower than its 52-week high of $85.22. T-Mobile is trading 30.6% higher than its 52-week low of $59.96.

On the same day, Sprint stock closed 2.1% higher due to news that more state attorneys general might drop out of the multistate lawsuit filed to block the merger deal.

T-Mobile stock has gained 23.1% YTD (year-to-date). AT&T has risen 31.1%, while Sprint has risen 7.7% YTD.

T-Mobile stock is trading 0.1% and 1.0% above its 50-day and 100-day moving averages, respectively. The stock is 0.7% below the 20-day moving average of $78.86.

For the last 14 days, T-Mobile’s relative strength index score was 49.36. The score suggests that the stock isn’t oversold or overbought. T-Mobile’s 14-day MACD is -0.40, which suggests that the stock is in a downward trading trend. In comparison, Sprint’s 14-day MACD is 0.01, while AT&T’s 14-day MACD is -0.07.

Read The T-Mobile–Sprint Merger’s Strategic Benefits, Where T-Mobile Stock Could Be Heading Now, and What the T-Mobile-Sprint Merger Delay Could Mean to learn more.

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