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T-Mobile and Sprint Merger Faces Another Hurdle

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T-Mobile (NYSE:TMUS) and Sprint’s (NYSE:S) proposed $26 billion pending merger deal hit another hurdle from the California Public Utilities Commission. According to a Wall Street Journal report, “The state utilities overseer is the only such body that hasn’t yet blessed the $26 billion deal, and its continuing review threatens to further delay—or even derail—a merger that has dragged on for nearly two years. The state body has until July to vote but might extend that timeline further.”

The report also said, “the California commission could demand further concessions from the carriers and delay the deal’s close, it was unlikely to scuttle the transaction.”

T-Mobile and Sprint merger

In April 2018, T-Mobile and Sprint announced an all-stock merger deal. However, the deal is still pending. The deal faces a lawsuit from several states seeking to block the transaction. The states think that the merger of the third and fourth-largest mobile operators in the US would reduce competition and lead to increased prices. The multistate lawsuit is led by New York and California.

In 2019, the Department of Justice and the FCC approved the deal based on certain conditions. The proposed new T-Mobile agreed to sell some wireless assets to pay-TV operator Dish Network (NASDAQ:DISH). Dish would acquire Sprint’s prepaid business and certain spectrum licenses for $5 billion. The company would likely replace Sprint by deploying its own wireless network.

What to expect from the earnings

On Monday, Sprint is scheduled to release its earnings results for the third quarter of fiscal 2019, which ended in December. For the third quarter, analysts expect the telecom company to report revenues of $8.2 billion, which implies a fall of 4.5% from $8.6 billion in the third quarter of fiscal 2018. For the same period, analysts expect Sprint’s earnings to be -$0.05 per share as compared to -$0.03 in the third quarter of fiscal 2018.

Analysts expect T-Mobile to report revenues of $11.8 billion in the fourth quarter, which implies a rise of 3.3% from $11.4 billion in the fourth quarter of 2018. For the same period, analysts expect T-Mobile’s adjusted EPS to be $0.83, which implies a rise of 10.7% from $0.75 in the fourth quarter of 2018.

Stock returns

In the last 12 months, Sprint and T-Mobile stocks returned -22.7% and 18.8%, respectively. Both of the telecom stocks underperformed the broader S&P 500 Index, which rose 23.7% in the last 12 months.

T-Mobile stock fell 0.73% and closed trading at $81.58 on January 24. The stock traded 4.3% below its 52-week high of $85.22 and 24.4% above its 52-week low of $65.56.

Based on T-Mobile’s closing price on January 24, the stock was trading 2.3% above its 20-day moving average of $79.75. T-Mobile is trading 4.3% above its 50-day moving average of $78.19 and 3.2% above its 100-day moving average of $79.03.

In comparison, Sprint stock fell 4.2% and closed trading at $4.83 on January 24. The stock was trading 4.2%, 9.9%, and 17.9% below its 20-day, 50-day, and 100-day moving averages of $5.04, $5.36, and $5.88, respectively.

Read T-Mobile and Sprint Merger in Limbo Due to Antitrust Issues and Merger Spotlight: Has Sprint Stock Bottomed Out? to learn more.

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