T-Mobile and Sprint announced Sunday that they reached an agreement to combine into a new company that would reshape the U.S. wireless landscape by reducing it to three major cellphone providers.
The deal would help the companies slash costs and could make them a stronger competitor to larger AT&T and Verizon. But consumers might see higher prices because the combined company would not have to offer as many promotions to lure customers.
The proposed all-stock deal values Sprint at about $59 billion and the combined company at $146 billion, including debt. Without debt, the combined company is valued at $26.5 billion.
It comes after Sprint dropped its bid for T-Mobile more than three years ago following concerns by the Obama administration about wireless competition. The two were poised to combine in October, but that deal was called off, too.
Sprint and its owner, Japanese conglomerate SoftBank, have long been looking for a deal as the company struggles to compete on its own.
I’m excited to announce that @TMobile & @Sprint
have reached an agreement to come together to form a new company – a larger, stronger competitor that will be a force for positive change for all US consumers and businesses! Watch this & click through for details.
— John Legere (@JohnLegere) April 29, 2018
Sprint has a lot of debt and has posted a string of annual losses. The company has cut costs and made itself more attractive to customers, BTIG Research analyst Walter Piecyk says, but it hasn’t invested enough in its network and doesn’t have enough airwave rights for quality service in rural areas.
T-Mobile, meanwhile, has been on a yearslong streak of adding customers. After the government nixed AT&T’s attempt to buy the company in 2011, T-Mobile led the way in many consumer-friendly changes, such as ditching two-year contracts and bringing back unlimited data plans. Consumers are paying less for cellphone service thanks to T-Mobile’s influence on the industry and the resultant price wars.
“T-Mobile does not need a merger with Sprint to succeed, but Sprint might need one to survive,” Piecyk wrote in a research note.
But MoffettNathanson analyst Craig Moffett said T-Mobile’s momentum is slowing, which may explain why the company and its parent, Germany’s Deutsche Telekom, “have warmed to the idea of a merger sooner rather than later.”
The supersized company would have nearly as many wireless subscribers as Verizon and AT&T. T-Mobile and Sprint could save money by merging their networks and closing stores.
Rea more at: AP News
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