In April 2018, T-Mobile (TMUS) and Sprint (S) announced their plans to merge. However, the long-awaited $26.5 billion merger deal is still pending. This is the third time the two companies have tried to merge. In 2014, the merger talks ended due to antitrust issues. In 2017, the merger talks ended as the companies couldn’t reach mutually agreeable terms.
T-Mobile and Sprint merger deal
However, it finally looks like the odds are in the favor of the T-Mobile and Sprint merger deal. On October 21, another state attorney general that sued to stop the merger agreement decided to drop the state’s lawsuit. The Colorado attorney general joined the multistate lawsuit to stop the combination, as it thought the merger would affect Coloradans. However, Colorado left the multistate lawsuit and now supports the merger deal after it struck an agreement with Dish Network (DISH) and T-Mobile.
In the agreement, DISH promised to add at least 2,000 jobs in Colorado. Meanwhile, T-Mobile promised to roll out 5G wireless service across most of the state, which includes rural areas. Colorado’s Chief Deputy Attorney General, Natalie Hanlon Leh, stated, “The agreements we are announcing today address those concerns by guaranteeing jobs in Colorado, a statewide buildout of a fast 5G network that will especially benefit rural communities, and low-cost mobile plans.”
On October 9, the Mississippi attorney general also decided to opt out from the multistate lawsuit and support the merger. The state backed the merger deal after T-Mobile and Sprint agreed to some specific promises that are beneficial to Mississippians. According to Reuters, about 13 states currently back the proposed merger.
T-Mobile and Sprint merger concerns
Currently, about 15 states and the District of Columbia oppose the merger deal of the nation’s third- and fourth-largest wireless carriers. The multistate court challenge is led by New York and California. This lawsuit is the last major obstacle that the T-Mobile and Sprint merger deal faces.
The lawsuit alleges that the merger deal “is bad for consumers, bad for workers, and bad for innovation.” New York Attorney General Letitia James stated that the settlement with Colorado does not repair the nationwide harms created by the merger deal. The court trial is scheduled to begin in December.
Former FCC Commissioner Robert McDowell believes that the multistate lawsuit will fail. In an interview with Bloomberg TV, McDowell stated that as more state attorneys general abandon the lawsuit, consumers would benefit.
Regulators blessed the merger deal
On July 26, the U.S. Department of Justice (or DOJ) signed off the merger contract between T-Mobile and Sprint. However, the approval comes with conditions. The two companies agreed to divest Sprint’s prepaid businesses like Boost Mobile and Virgin Mobile to Dish Network. Dish would also acquire a certain wireless spectrum from the new T-Mobile.
The deal with Dish Network could be worth $5 billion. The new T-Mobile would also offer Dish access to about 20,000 cell sites and multiple retail locations. Dish is expected to become the fourth nationwide wireless mobile operator after the merger deal.
On October 16, CNBC reported that the Federal Communications Commission (or FCC) signed off the merger deal between T-Mobile and Sprint. FCC Chairman Ajit Pai and the two Republican commissioners voted for the merger deal. The remaining two Democratic commissioners voted against the merger deal. However, T-Mobile and Sprint are still awaiting the formal approval order from the FCC.
Year-to-date, T-Mobile stock has risen 29.1% through October 21. During this period, AT&T (T) and Sprint have risen 34.0% and 10.3%, respectively.
On October 21, T-Mobile stock rose 0.6% and closed at $82.09, with a market cap of $70.1 billion. The stock is trading 36.9% above its 52-week low of $59.96 on December 26, 2018. T-Mobile stock is trading 3.7% below its 52-week high of $85.22 per share.
T-Mobile stock reached its 52-week high on July 26 after the DOJ approved the T-Mobile–Sprint merger deal on that day. Analysts have a 12-month mean target price of $88.95 for T-Mobile, which is 8.4% higher than TMUS’s previous closing price. Among the 21 analysts covering T-Mobile, 17 recommended a “buy,” and four recommended a “hold.”
On October 21, AT&T stock fell 0.6% and closed at $38.23. The second-largest wireless carrier is in discussions with Paul Singer’s Elliott Management to resolve issues that the activist investor raised in September.
For the last 14 days, T-Mobile has had a MACD (moving average convergence divergence) of 2.56, which suggests that a stock is in an upward trading trend. T-Mobile stock is trading 4.0%, 4.4%, and 5.5% above its 20-day, 50-day, and 100-day moving averages, respectively. In the third quarter, T-Mobile is expected to report non-core EPS of $0.96 on revenue of $11.3 billion.