Sprint and T-Mobile, after years of going back and forth as to whether they are going to tie up two of the largest telecom providers in the U.S ., have announced that the two companies have entered a consolidation agreement this morning.
The merger will be an all-stock transaction, and will now be subject to regulatory approval. That latter component is going to be its biggest challenge, because it will not only tie up the No. 3 and No. 4 carriers into the U.S. into a single unit, but also that international organizations hold significant stakes in both companies. SoftBank controls a majority of Sprint while Deutsche Telekom controls a significant chunk of T-Mobile. Following the administration’s intervention in the Broadcom-Qualcomm takeover attempt, it isn’t clear what will actually go through in terms of major mergers these days.
Bloomberg is reporting that Deutsche Telekom will have 42% ownership of the combined company, while SoftBank will own around 27% of the company.
As expected, the debate here is for the expansion of 5G networks as plans for that start to ramp up. T-Mobile argues in its proclamation that it will help it be competitive with AT& T and Verizon as telecom companies start to roll out a next-generation 5G network, though it does in the end remove air carriers option for end consumers in the U.S..
” The New T-Mobile will have the network capability to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G ,” T-Mobile said in a statement as part of the announcement.” The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT& T, and the blended company is positioned to do the same in 5G with deep spectrum assets and network capacity .”
Both companies appeared to be finalizing the deal on Friday, when they defined valuation terms and were preparing to announce the consolidation today .~ ATAGEND The deal values Sprint at an enterprise value of around $59 billion, with the blended company having an enterprise value of $146 billion. AT& T has a market cap of around $214 billion, while Verizon has a market cap of around $213 billion, as of Sunday.
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