Job cuts before T-Mobile and Sprint merger closes
According to a LightReading report on February 26, “T-Mobile has laid off a number of employees within its Metro by T-Mobile prepaid business. The extent of the layoffs is unclear.” Notably, the company didn’t comment on the layoff reports.
Last week, CWA (Communications Workers of America) analysis highlighted that the merger deal approval could result in around 30,000 job losses. In a statement, CWA President Chris Shelton said, “T-Mobile is so eager to pad its executives’ bank accounts that they couldn’t even wait until the merger has gone through to start firing people.” The report also said, “Since this deal was first announced, we’ve been sounding the alarm that the merger means tens of thousands of job cuts are coming. Sure enough, here they are. If the merger passes the final hurdles, we can expect thousands more. That’s why these workers need a voice at the table to protect their jobs and wages.”
Final stages of the T-Mobile and Sprint merger deal
T-Mobile and Sprint are in the final stages of closing their merger deal. The deal received conditional approval from the Department of Justice and the FCC in 2019. The companies agreed to sell certain wireless assets to Dish Network (NASDAQ:DISH). Dish would acquire Sprint’s prepaid business and some spectrum licenses for $5 billion.
Last month, a US district court judge allowed T-Mobile and Sprint to merge. More than a dozen state attorneys general filed a lawsuit to block the combination. The states argued that the merger would reduce competition and lead to higher prices for wireless consumers.
Last week, SoftBank agreed to revise the merger terms with Deutsche Telekom to avoid an additional delay in closing the deal. Notably, Sprint is a subsidiary of SoftBank, while T-Mobile is a subsidiary of Deutsche Telekom.
According to a Reuters report, “SoftBank has agreed to surrender about 48.8 million T-Mobile shares acquired in the merger to the new company after the deal closes, changing the exchange ratio to 11 Sprint shares for each T-Mobile share, higher than the originally agreed 9.75 shares. Sprint shareholders other than SoftBank will continue to receive the original exchange ratio.” The report also said, “SoftBank can get the shares back if the combined company hits stock price milestones, the companies said without disclosing the details.”
T-Mobile stock has risen 15.0% YTD (year-to-date) as of February 28. During the same period, Sprint and AT&T (NYSE:T) have returned 76.4% and -9.9%, respectively.
On February 28, T-Mobile’s closing price was $90.16 per share. Based on the last closing price, T-Mobile has a market cap of $77.3 billion—the third-largest among all of the major US telecom operators. The stock price has fallen 8.5% in the trailing five-day period, while it has risen 10.4% in the trailing one-month period. T-Mobile stock was trading 11.0% below the 52-week high of $101.35. The stock hit a 52-week high last month after a US district court judge approved the merger deal. The company is confident about closing the merger deal by April 1. The stock is trading 32.3% above its 52-week low of $68.16.
Among the 22 analysts covering T-Mobile, 18 recommend a “buy,” while four recommend a “hold.” None of the analysts recommend a “sell.” Analysts have given the stock a consensus target price of $96.63 and a median consensus estimate of $99.00. Now, T-Mobile is trading at a 9.8% discount to its consensus median target estimate. Last week, HSBC increased its target price on the stock from $86 to $97.
On February 28, AT&T stock fell by 1.4% and closed at $35.22. Meanwhile, Sprint stock fell by 1.2% and closed at $9.19.