Breaking up is hard to do: T-Mobile will owe Sprint USD600m if it ditches mega-merger

2 May 2018

According to documents filed with the US Securities and Exchange Commission (SEC), T-Mobile US will owe Sprint USD600 million if the company decides to walk away from the recently announced mega-merger transaction. In addition, Axios reports that both parties have agreed not to solicit any alternative to their proposed combination. However, neither party will be obliged to pay compensation if the tie-up is rejected by the Federal Communications Commission (FCC) or the Department of Justice (DoJ).

TeleGeography notes that T-Mobile’s post-2011 operational turnaround was enabled in large part by its own receipt of a so-called ‘break-up fee’ following its failed takeover by AT&T. T-Mobile received USD3 billion in cash as well as a large package of AWS mobile spectrum in 128 Cellular Market Areas (CMAs), including twelve of the so-called ‘Top 20’ markets.

As previously reported by TeleGeography’s CommsUpdate, T-Mobile and Sprint entered into a definitive agreement on 29 April to merge in an all-stock transaction at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share or the equivalent of 9.75 Sprint shares for each T-Mobile US share. Based on closing share prices on 27 April, this represents a total implied enterprise value of approximately USD59 billion for Sprint and approximately USD146 billion for the combined company.

Following the successful conclusion of the T-Mobile-Sprint merger, it is understood that the company will be 41.7% owned by T-Mobile owner Deutsche Telekom (DT) and 27.4% owned by Sprint parent SoftBank Group Corp, with the remaining 30.9% in free float.

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