As they say, the third time is a charm! T-Mobile and Sprint tell us they have entered into a definitive agreement to merge in an all-stock transaction at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share or the equivalent of 9.75 Sprint shares for each T-Mobile US share. Based on closing share prices on April 27, this represents a total implied enterprise value of approximately $59 billion for Sprint and approximately $146 billion for the combined company. The new company will have a strong closing balance sheet and a fully funded business plan with a strong foundation of secured investment grade debt at close.
The combined company will be named T-Mobile, and it will be a force for positive change in the U.S. wireless, video, and broadband industries. The combination of spectrum holdings, resulting network scale, and expected run rate cost synergies of $6+ billion, representing a net present value (NPV) of $43+ billion will supercharge T-Mobile's Un-carrier strategy to disrupt the marketplace and lay the foundation for U.S. companies and innovators to lead in the 5G era.
The leaders of both companies are determined to close a deal, only because their prospects of doing it alone grow dimmer by the year.
New technology, stiff competition from wireless rivals and an aging cellphone sector keep driving Sprint and T-Mobile into each other's arms. Both companies hope to squeeze billions in savings by uniting operations despite their owners' different management styles and a tough regulatory environment.
The new T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue to lead the world in the coming 5G era, as U.S. companies did in 4G. The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.
The combined company will have lower costs, greater economies of scale, and the resources to provide U.S. consumers and businesses with lower prices, better quality, unmatched value, and greater competition. The new T-Mobile will employ more people than both companies separately and create thousands of new American jobs. Joining forces would create a wireless provider in the same class as Verizon which reported about 116 million wireless customers in the U.S. at the end of 2017, and close to AT&T Inc., which said it had 93 million wireless customers. T-Mobile and Sprint had roughly 59 million and 41 million, respectively, at the end of last year. The figures exclude some connected devices and wholesale agreements with other carriers riding atop the major carriers' networks.
The companies will face regulatory challenges in Washington. The Justice Department sued AT&T Inc. in November to block its $85 billion takeover of Time Warner Inc., and lawyers for the two sides are making closing arguments on Monday.
In a reflection of the risk that authorities will block combination, the T-Mobile-Sprint deal doesn't include a break-up fee that one side would owe should regulators block a tie-up, the people familiar with the matter said.