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Sprint, T-Mobile agrees to a merger of $ 26 billion



The boards of

sprint
Corp.


S 8.33%

and

T-Mobile US
Inc.


TMUS 0.66%

smashed a $ 26 billion merger that would dominate the US mobile market, if approved by antitrust authorities, by three national players ,

New technology, fierce competition from cell phone competitors, and the aging mobile phone industry are driving Sprint and T-Mobile into their arms. Both companies hope to achieve billions of dollars in savings by merging their businesses despite the different management styles and harsh regulatory environment.

The all-stock deal would combine Sprint with a market value of $ 26 billion with T-Mobile. with a market value of $ 55 billion, based on Friday's closing prices. The two companies together have a net debt of about 60 billion US dollars.

As part of the transaction, T-Mobile exchanges 9.75 Sprint shares for each T-Mobile share. T-Mobile parent Deutsche Telekom will hold 42% of the combined company and Sprint's parent company SoftBank Group will own 27%. The remaining 31

% are held by the public.

Deutsche Telekom also controls the voting rights of over 69% of the new company and appoints nine of its 14 directors. The companies said they hope to close the deal in the first half of 2019.

Joining forces would create a mobile operator with nearly 100 million mobile subscribers, second only to the US

Verizon communication
Inc.

The combined company, which would be called T-Mobile, would be headed by T-Mobile CEO

John Legere.

Businesses in Washington are still facing a tough fight. The republican government has not always been open to large business combinations. The Ministry of Justice sued

AT & T
Inc.

in November to block its $ 85 billion acquisition of

Time Warner
Inc.,

and lawyers for the two sides conclude on Monday closing arguments.

Given the risk that the authorities would block an attempt of combining the country's third and fourth largest mobile service providers, the Sprint T-Mobile contract is not expected to include a resolution fee for the one-off debtors should have a planned one Block the deal, the people familiar with the matter said.

The government also has a victory in the past: It forced AT & T Inc. and T-Mobile to abandon the proposed merger in 2011

In 2014, the then head of the Federal Communications Commission made it clear that four national suppliers are necessary to ensure competition and reduce consumer prices. This forced Sprint and T-Mobile to abandon their plans to combine. The current FCC chairman, Republican

Ajit Pai,

Emagazine.credit-suisse.com/app/art … = 157 & lang = DE

"This is not the case of 4 to 3 wireless companies – there are now at least 7 or 8 major competitors in this converging market, "said Mr Legere said on Sunday. The companies also vowed after the transaction to boost attitudes and spending in the US.

Sprint and T-Mobile executives could change the time. Investing in the 5G infrastructure could blur the boundaries between cell phone providers, cable companies and technology companies. Even with current technologies,

Comcast
Corp.

has offered its cable customers on Verizon's network a low-cost mobile service

Dish network
Corp.

, led by its chairman

Charlie Ergen,

now builds a wireless network that can connect autonomous cars, drones and other machines alongside mobile phones. Companies could use this project to argue that there are more than four nationwide mobile phone companies, although Dish would be a harder sell if Dish avoided competing directly with Sprint and T-Mobile.

"Charlie alone can change the outlook for this business," said Blair Levin, a regulatory analyst for New Street Research LLC.

Last year, Sprint and T-Mobile debated a deal, but the talks crashed in November after they had not agreed who would control the combined company said the deal. Japanese technology giant SoftBank controls 83% of Sprint. Deutsche Telekom owns 62% of T-Mobile.

Softbank founder

Masayoshi son,

Whose firm took control of Sprint for $ 22 billion in 2013 was reluctant to give up control of Sprint last year. A person close to Mr. Son said the pressure on Sprint to introduce 5G technology makes it more accessible to give up some control

. Son will join the board of directors of the merged company, but the chairman of the board will be the CEO of Deutsche Telekom, Tim Höttges. Sprint CEO

Marcelo Claire

Sprint's shares rose 25% and closed at $ 6.50 on Friday, after the Wall Street Journal reported on April 10 that the two sides had rekindled the talks.

Companies have pledged to invest $ 40 billion in their network and business for the first three years after the deal closes on Sunday. But companies that employ around 200,000 people and own thousands of retail outlets will also be looking for cost-cutting opportunities. On Sunday, they projected $ 6 billion in annual savings

Wireless managers have long complained that there are fewer opportunities to make a profit because almost every American adult – and many of his children – own a smartphone has. They stick to these devices longer and cut into the device sales. All four top carriers now offer plans that promise unlimited data, making it harder for them to show that they are different from their rivals.

Even T-Mobile, which adds millions of customers each year at the expense of its rivals, has shown signs that growth is cooling off. The company predicted that 2 million to 3 million subscribers would expect monthly contracts this year, less than in 2017. Such so-called postpaid subscribers are lucrative, as they tend to spend more every month and change less frequently than people with prepaid plans. Meanwhile, network engineers say next-generation 5G standards could enable wireless companies to serve huge new markets, from home-dominated Internet services to autonomous cars.

But the introduction of 5G services will require massive investment in mobile spectrum and the installation of hundreds of thousands of antennas across the country, giving new impetus to Sprint and T-Mobile executives.

AT & T said it plans to spend at least $ 23 billion on investment this year in investing in a new public safety net. Verizon said it plans to spend at least $ 17 billion on investment in 2018. Both budgets are well ahead of Sprint and T-Mobile, each spending less than $ 10 billion a year on construction, electronics and the like.

Expenditure will only increase as companies accelerate the installation of 5G devices. "You can not win a race if you have half of the horses," said Roger Entner, analyst at telecommunications consultant Recon Analytics Inc.

Winning the race would not be cheap. Consulting firm

Accenture

estimates that US telecommunications companies could jointly invest $ 275 billion over the next seven years to deploy next-generation wireless technology

Write to Drew FitzGerald at [email protected] , Dana Cimilluca at [email protected] and Dana Mattioli at [email protected]


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