T-Mobile US, Sprint To Merge In All-stock Deal

(RTTNews) - T-Mobile US (TMUS), a unit of German telecom giant Deutsche Telekom (DTEGY.PK), agreed to merge with Sprint Corp. (S), a unit of Softbank Group Corp., in an all stock deal. The combined company, which will be named T-Mobile, will be a force for positive change in the U.S. wireless, video, and broadband industries, the firms said. If allowed by antitrust regulators, the combination would see the U.S. wireless market dominated by three national players.

In pre-market activity on the NYSE, Sprint shares were losing around 12.6 percent to trade at $5.68, while T-Mobile shares were down 1.6 percent on Nasdaq at $63.50.

The Wall Street Journal reported that it is the third time in the last four years that both companies have attempted the combination.

In a statement, the companies said that the New T-Mobile is expected to accelerate long-term economic stimulus for the U.S. in the 5G era, creating thousands of American jobs. The combination is expected to supercharge T-Mobile's Un-carrier strategy and to light up a broad and deep 5G network faster than either company could separately.

According to T-Mobile, only the combined company will have the network capacity to create 5G nationwide network in the critical first years of the 5G innovation cycle. These years will determine if American firms lead or follow in the 5G digital economy.

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

Further, the new company will lower costs, and expects prices to drop as competition heats up. Further, the New T-Mobile plans to invest up to $40 billion in its new network and business in the first three years alone, a massive capital outlay that will fuel job growth at the new company and across related sectors. This is 46% more than T-Mobile and Sprint spent combined in the past three years.

The transaction will be 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. This represents a total implied enterprise value of about $59 billion for Sprint and approximately $146 billion for the combined company, based on the value on April 27.

Sprint has had a market value of $26 billion on Friday's closing, while T-Mobile's market value was $55 billion. As per reports, the two companies also have about $60 billion of combined debt.

The completion of the transaction, subject to a number of closing conditions, is expected in the first half of 2019.

Following the merger, T-Mobile parent Deutsche Telekom will own 42% of the combined company, while Sprint parent SoftBank Group will own 27% and the remaining 31% by the public.

Deutsche Telekom would also control voting rights over 69% of the new company and appoint nine of its 14 directors, while 4 will be nominated by SoftBank Group. The new company will be headquartered in Bellevue, Washington, with a second headquarters in Overland Park, Kansas.

John Legere, current President and Chief Executive Officer of T-Mobile US and the creator of T-Mobile's successful Un-carrier strategy, will serve as Chief Executive Officer.

Meanwhile, Deutsche Telekom said that the transaction will not affect its outlook on the group for the current financial year 2018. Deutsche Telekom's statement on dividend policy for the financial year 2018 also remains unchanged.