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Bloomberg
Sprint Corp. and T-Mobile US Inc. are putting the finishing touches on a merger that’s likely to be announced when the wireless carriers report quarterly earnings at the end of October, according to people familiar with the matter.
Both sides are conducting final due diligence to decide on the exchange ratio that will determine Sprint’s valuation, said the people, who asked not to be identified because the discussions are private.
Setting an exchange ratio for
the all-stock deal will be one of the last steps to clinching the merger and hasn’t yet been finalised, the people said.
Sprint shares fell 2 percent to trade around $7.35 in New York Friday, valuing the company at about $29 billion. SoftBank Group Corp., the majority owner of the fourth-largest US carrier, would accept a valuation around Sprint’s market price, people familiar with the matter said in September. The wireless carriers are pursuing the deal to bulk up against larger competitors AT&T Inc. and Verizon Communications Inc. in a cutthroat market for mobile-phone customers.
T-Mobile shares rose 1.4 percent to $62.39 at 12:23 p.m. for a market valuation of about $52 billion.
The companies are also continuing discussions around non-cash items, including the location of
the combined entity’s headquarters and appointments to the executive management team, one of the
people said.
A traditional breakup fee isn’t expected to be included in the final agreement, two of the people said, reducing the risk for both companies if US regulators reject the merger. In that sense, a deal would be similar to the all-stock merger announced by Comcast Corp. and Time Warner Cable Inc. in 2014, which didn’t contain a termination fee for either side. Comcast walked away from that deal a year later after regulators whether it would be reduce market competition.
Antitrust Scrutiny
A tie-up between Sprint and T-Mobile would cut the number of national wireless carriers to three from four, meaning it’ll likely feature high on the to-do list of Makan Delrahim, the new head of the antitrust division at President Donald Trump’s Justice Department.
Eliminating a breakup fee from this deal would align both companies to lobby regulators for
approval without any conflicts
of interest.
AT&T paid a record $4 billion breakup fee to T-Mobile in 2011 when its takeover attempt for the smaller wireless network failed.
The fee, which included cash, favorable roaming rates and wireless spectrum, helped strengthen T-Mobile as a competitor and catapult it over Sprint to become the nation’s No. 3 carrier.
While no breakup fee provision is planned for this deal, SoftBank may still push for a cash termination payment if it feels it has compromised more than it would like on other issues that haven’t been finalised, one of the people said.
Representatives for Sprint, T-Mobile, SoftBank and Deutsche Telekom AG, T-Mobile’s majority owner, declined to comment.
The companies are keen to finalise a deal agreement that can be released alongside quarterly earnings, the dates of which haven’t yet been set.
Lining up an announcement with the first set of results would help avoid confusion over the status of the deal, the people said.
Sprint and T-Mobile typically announce their earnings before their majority owners, SoftBank and Deutsche Telekom. Last year, that was October 24 for T-Mobile, and a day later for Sprint.
If remaining deal obstacles that arise from due diligence can’t be overcome by then, an agreement could be pushed to a later date, the people said.
