Sprint, T-Mobile edge closer to USD32bn ‘mega-merger’; USD40 per-share offer agreed

5 Jun 2014

Sprint Corp has agreed to pay around USD40 per share to buy T-Mobile US, a person familiar with the matter told Reuters yesterday, signalling solid progress in a long-contemplated deal to merge the United States’ third- and fourth-largest wireless operators. The price, which represented a 17% premium to the company’s closing price on the New York Stock Exchange (NYSE) yesterday, effectively values T-Mobile US at USD32 billion. Deutsche Telekom (DT) currently owns 67% of T-Mobile US and is expected to retain a roughly 15% to 20% stake in the combined company as part of the deal.

Despite the reported agreement, the so-called ‘mega-merger’ is likely to face a frosty reception from the US authorities. The Federal Communications Commission (FCC) and Department of Justice (DoJ) have already raised concerns about such a tie-up, suggesting that it could lead to higher prices for consumers. In December 2011, the FCC rejected AT&T’s long-running USD39 billion takeover bid for T-Mobile on similar grounds.

According to TeleGeography’s GlobalComms Database, as at 31 March 2014, Sprint claimed a 16.8% share of the wireless market, compared to T-Mobile’s 15.4% share of the spoils. If combined, the enlarged operator would hold a 32.2% market share, placing it narrowly ahead of second-placed AT&T Mobility (31.1%), but slightly behind market leader Verizon Wireless (34.5%).

United States, Deutsche Telekom (DT), SoftBank Group Corp, Sprint Corporation, T-Mobile US