Mobile is Buying Sprint at $26 Billion Amid Regulatory Concerns
Apr 30 2018 by Kate Woods
T-Mobile became the first major USA carrier to eliminate two-year contracts, a shift quickly embraced by consumers and copied by competitors. T-Mobile CEO John Legere, who is going to run the combined company, has proven himself to be a branding master, having taken T-Mobile from the bottom of the pack to unseating Sprint as the industry No. 3 and leaving all his competitors' stock prices in the dust. Claure told analysts on a conference call that Comcast was now adding more wireless users on a net basis than AT&T and Verizon - combined. In the case of Sprint and T-Mobile, it would be much easier for the DoJ to argue that a merger would decrease competition and drive up prices.
Deutsche Telekom will own 42 percent of the combined company, and will control the board of the combined company, nominating nine of the 14 directors.
China is now racing ahead on 5G research and investment and the sense was that the Trump administration, distrustful of the Asian power, would be more inclined to green-light a deal than its predecessor, the people said.
Investors have been anticipating a deal like this for some time. The most recent was in November of previous year, when talks between the two companies fell apart amid reported disagreements over Sprint's valuation and SoftBank's reluctance to cede control of Sprint. But in the Donald Trump era, the FCC chairman said he was open about the number of major players in the USA mobile market, the Bloombergreport further said, adding that it has created a major obstacle for the justice department.
Trust me when I say that this is the deal we have been waiting for, and this is the combination that will take everything to a new level! The two companies had reportedly resumed talks earlier this month.
Claure said the difference between the 4G and 5G is like going from black-and-white television to color.
The advantages being touted by T-Mobile include the thousands of jobs that will need to be filled, better rural coverage, and most importantly the ability to invest $40 billion in the build of a next-generation wireless network over the next three years.
SoftBank has been constrained in its ability to support Sprint financially because it has been under pressure to trim its own debt, which reached $147bn as of the end of December. The announcement also said the merger will allow the companies to move quickly in to 5G service and keep customers' costs down. Sprint has about $32 billion in debt on its books, while T-Mobile generates a fraction of the cash that Verizon and AT&T do. This gives Deutsche Telekom direct and indirect voting rights for a total of 69 percent of T-Mobile shares, and the German operator will consolidate the new group. In that instance, AT&T is pursuing vertical integration by acquiring a content owner, rather than a rival cable or telecoms company.
For some context, let's look at Canada, where despite a few smaller players, three entrenched network providers control over 90% of the wireless market.