Mobile

Everything you need to know about the T-Mobile and Sprint merger

The merger of T-Mobile and Sprint, the third and fourth largest carriers in the U.S., has been close to happening for several years, and the time has finally come. On Sunday, T-Mobile CEO John Legere took to Twitter to officially announce the merger, saying the two companies “have reached an agreement.” He posted a video alongside Sprint CEO Marcelo Claure giving some details on the merger.

The combined company will have more than 126 million customers, seeing it close in on rivals AT&T with 141 million subscribers, and Verizon with 150 million. The merger would also means an improvement in overall 5G wireless technology, which promises greater, pervasive connectivity and faster speeds, but development is costly and complicated.

We’ve got all the news and rumors to keep you up to date.

It’s happening

On Sunday, T-Mobile CEO John Legere tweeted a video announcing that Sprint and T-Mobile had agreed to form a new company. In press release from the same day, the combined companies were given a value of $ 146 billion. The company’s ownership will be split three ways, with Deutsche Telekom owning 42 percent and SoftBank Group holding 27 percent. The remaining 31 percent will be publicly owned.

The new company will be named T-Mobile, and Legere will serve as Chief Executive Officer. Sprint CEO Marcelo Claure and SoftBank Group Chairman and CEO Masayoshi Son will serve on the board of the new company.

Before the deal can be finalized, it will have to be approved by the Justice Department, which will review it for anti-trust violations. In 2011, the Justice Department blocked a similar deal between AT&T and T-Mobile on anti-trust grounds.

Legere is confident that the Justice Department will approve this deal, however.

“This isn’t a case of going from 4 to 3 wireless companies — there are now at least 7 or 8 big competitors in this converging market,” Legere said. “And in 5G, we’ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G. We’re confident that, once regulators see the compelling benefits, they’ll agree this is the right move at the right time for consumers and the country.”

One of those “compelling benefits” is likely to be job growth. The new company promises to employ at least 200,000 people in the U.S. That number is expected to grow as the “New T-Mobile,” as the company is called in the press release, has pledged to invest $ 40 billion in infrastructure over the course of three years.

The other major promise that 5G is coming for all. The New T-Mobile says it will be the only wireless provider with the capability to provide true 5G service. This, in theory, will force its competitors to invest in new technologies prompting the spread of 5G.

“Going from 4G to 5G is like going from black and white to color TV,” Sprint’s Marcelo Claure said. “It’s a seismic shift — one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.”

The company is citing 15x faster speeeds on average by 2024, when compared to T-Mobile’s network today.

“5G for All will unleash incredible benefits and capabilities for consumers and businesses,” the release reads. “Imagine, for example, augmented reality heads-up displays that see everything you do, and provide real-time cloud-driven information about the people and objects around you. Imagine never losing anything again because low-cost sensors with decade long battery life are embedded in everything you own. Imagine an earpiece providing real-time translation as a friend speaks to you in another language.”

Previous talks

T-Mobile and Sprint sat around a table in November 2017, when talks were said to have fallen apart due to an inability to agree on valuations. Before this, the two came close to merging in 2014, but the deal was cooled when concerns over antitrust were raised by President Barack Obama.

During the 2017 discussions, Legere said any merger would have to be in the long-term interests of shareholders.”We have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record.”

In turn, Claure echoed the sentiment: “While we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination … We are determined to continue our efforts to change the wireless industry and compete fiercely.”

The lead-up

Control over the new company was rumored to be once again being discussed in the April 2018 meetings, and according to a report from Nikkei, it was in 2017 as well. The report stated the board of directors for Softbank were concerned over who would control the combined entity. Those doubts likely helped derail previous plans altogether.

During the merger talks in 2017, the carriers reportedly sought a merger without any asset sales, meaning each would keep the maximum amount of its respective “spectrum holdings and cost synergies … before regulators ask for concessions.” Such an approach could face serious questions from regulators as the Federal Communications Commission prohibits rival carriers from conspiring during airwave auctions. The carriers likely saw a very real concern that such a scheme could be rejected by antitrust regulators with the Department of Justice. Administration changes in both the Justice Department and FCC made such a rejection less likely, however.

“It is better for Sprint and T-Mobile to listen and learn the concerns of regulators first, and see whether there is anything that can be done to address those concerns,” MoffettNathanson research analyst Craig Moffett said of the impending deal.

A ‘stock-for-stock’ merger

In the past, the parent companies of T-Mobile and Sprint — Deutsche Telekom and Softbank, respectively — have been in “frequent conversations” about a “stock-for-stock” merger. During their last discussions, two sources close to the matter claimed SoftBank would own 40 to 50 percent of the combined company, while Deutsche Telekom would own a majority stake, Reuters reported in late September.

Previously, Bloomberg and German newspaper Handelsblatt reported that Deutsche Telekom had made strides toward a merger. Those reports also claimed that the company wanted an all-stock deal with Sprint, as well as a contractual agreement to continue T-Mobile’s current marketing strategy after the two carriers combined.

Merging with the ‘Un-carrier’

While both companies would undoubtedly benefit from a merger, Sprint definitely had the most to lose if the talks had failed. The carrier has been playing subscriber catch-up with rival carriers AT&T, Verizon, and T-Mobile. T-Mobile is currently the third largest carrier in the U.S. with 72.6 million subscribers, while Sprint falls into a distant fourth place with around 53.6 million customers.

In addition to subscribers, Sprint continues to lag behind T-Mobile in terms of coverage as well. Earlier this year OpenSignal reported that Sprint was, once again, dead last in all of its categories for its State of Mobile Networks report.

Updated on April 29: T-Mobile and Sprint have reached an agreement for the merger.

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