Sprint Corporation (S) and T-Mobile US Inc (TMUS) near $32 billion merger

Posted Jun 4, 2014

Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) are nearing a deal to merge. Sprint and T-Mobile have talked about merging for years, but the talks postponed over and over due to other deals taking place and antitrust regulation. However, the two companies have settled on a $32 billion deal that is expected to happen this summer, according to sources with The New York Times.

Sprint would acquire T-Mobile for around $40 per share in cash and stock, which is a 17% premium of the price as of today. The talks are not finalized and could still fall apart. T-Mobile and Sprint face intense competition against Verizon and AT&T.

Both of the rivals have over 100 million subscribers. And Verizon acquired full control of Verizon Wireless after making a $130 billion deal with Vodafone last year. Verizon is the largest wireless operator in the country and offers cable TV and landlines. AT&T recently announced it was acquiring DirecTV for $49 billion. Comcast and Time Warner Cable made a $45.2 billion deal, which would create the largest cable and TV operator.

Sprint and T-Mobile each have around 50 million subscribers and offer only wireless services. Being able to stay competitive would become increasingly difficult if Sprint and T-Mobile went at it alone. T-Mobile is 67% owned by Deutsche Telekom of Germany. T-Mobile merged with MetroPCS last year. Under the proposed deal, Sprint would own around 20% of the combined company. Sprint is owned by Japanese company SoftBank.

If a merger is approved by the boards at both companies, the deal would likely face regulatory scrutiny. The Justice Department indicated earlier that it preferred the country to have four major telecommunication players rather than three.

The Justice Department still has to approve of Comcast’s acquisition of Time Warner and AT&T’s deal for DirecTV. AT&T attempted to buy T-Mobile three years ago, but regulators essentially blocked that deal.

The early terms of the deal included a breakup fee of over $1 billion that Sprint would pay T-Mobile if the deal is not made.

According to the NY Times, the two sides have not conducted due diligence on one another, drafted a definitive agreement, or arranged financing. T-Mobile CEO John Legere supports the merger and could become the leader of the combined company.