Sprint is looking to buy T-Mobile for $32 billion
Sprint has agreed to buy T-Mobile for $32 billion according to Reuters. The deal has not been announced by the companies yet and the information comes from unnamed sources. The U.S. only has four major carriers at the moment, but if this deal goes through and is approved by regulators there will only be three. Softbank owns Sprint and two-thirds of T-Mobile is owned by Deutsche Telekom so this is basically a Japanese company buying what is essentially a German company. Even though we’re talking about a couple of U.S. carriers, this deal is in fact between two foreign companies.
T-Mobile has been very creative in the last year in competing with Verzion and AT&T. But the bottom line is that Sprint has been losing money for seven years now and is deeply in debt. The smaller carriers are arguing that they have to get together or else they wont survive. The T-mobile – AT&T merger got stopped by the government so this might be the time for them to try something else. If the acquisition doesn’t go through Sprint would have to pay T-Mobile more than a billion dollars in cash. As we’ve mentioned, the deal by AT&T didn’t work out and the company had to pay dearly. The Sprint- T-Mobile deal would roughly be %50 cash and %50 stock.
Sources say Sprint has agreed to pay $40 dollars per share in order to buy T-Mobile. The shares have grown a lot and are now more than double since the carrier bought the smaller rival MetroPCS a year ago. Even though $40 per share, amounting to a grand total of $32 billion seems like a lot of money for you and me, others are claiming this price is very low. Hannes Witting, analyst at JP Morgan says that the company is actually worth more than $40 billion. “T-Mobile US should be worth more than that given that the synergies should exceed $20 billion, Deutsche Telekom would share some of the execution risk and Sprint would be getting control … Somewhere in the high 40s would be more appropriate,” the analyst said.
Softbank and Deutche Telekom still have some details to negotiate, including the termination fee if the deal doesn’t go through for some reason. However, the biggest obstacle seem to be the regulators at the moment. Both the U.S. Federal Communications Commission and the Department of Justice might not like this acquisition one bit. They have already expressed the desire to see at least two more carriers competing against AT&T and Verizon, the current market leader. We’ll keep you up to date with any further developments so stay tuned.