It looks like T-Mobile Inc (NASDAQ:TMUS) and Sprint Corp (NYSE: S) are on the brink of a merger or consolidation. If this sounds like old news you should know that these talks are nothing new but the deal is. Preliminary talks began back in August but a new agreement now will see that Deutsche Telekom AG will have control over a combination of the two companies.
Of course, to really understand the complications of the deal, we have to recognize that Japan’s SoftBank Group Corp owns a majority stake in Sprint and has been in talks with the T-Mobile parent Deutsche Telekom for some time now. As far back as three years ago, Softbank made an attempt to acquire the T-mobile parent but had to abandon the idea on the heels of US antitrust concerns. Surely, that deal would have put SoftBank in control of the new, merged company to leave Deutsche Telekom as a minority shareholder.
But since that time, T-mobile has surpassed Sprint in overall market capitalization, almost doubling the market value: Sprint sits at about $30 billion while T-mobile has skyrocketed to a market value of about $51 billion.
Now, there is no certainty about whether or not this new deal is going to require any regulatory approval, but for now the deal is expected to receive approval from the United States Department of Justice after the traditional—and traditionally lengthy—review process.
While many analysts have downgraded the success of the merger, the outlook is still positive. In addition, Barclays has even attested: “We continue to believe 1) a deal makes sense both strategically and financially (at the right price of course), and 2) the current regulatory environment seems to provide the best window to attempt a transaction,” in a very recent research note. “Whether both operators can get to a meeting of the minds on whether an attempt makes sense is of course the critical first question. Moreover, whether that deal gets approved remains the next question. We can see a path forward, but ultimately it comes down to whether the respective parties can.”
Sprint shares are up nearly 7 percent and T-Mobile shares are up more than 4 percent in morning trading.