eBusiness Weekly
T-Mobile US Inc and Sprint Corp said on Sunday they had agreed to a $26 billion all-stock deal and believed they could win over skeptical regulators because the merger would create thousands of jobs and help the United States beat China to creating the next generation mobile network.
The agreement capped four years of on-and-off talks between the third and fourth largest U.S. wireless carriers, setting the stage for the creation of a company with 127 million customers that will be a more formidable competitor to the top two wireless players, Verizon Communications Inc and AT&T Inc.
U.S. regulators, who have challenged in court AT&T’s $85 billion deal to buy U.S. media company Time Warner Inc, are expected to grill Sprint and T-Mobile on how they will price their combined wireless offerings.
Verizon has 116 million U.S. wireless customers, according to a spokesman, while AT&T has 93 million branded customers, as of the first quarter.
Their first round of merger talks ended unsuccessfully in 2014 after the administration of then-U.S. President Barack Obama expressed antitrust concerns.
The new deal will create the highest-capacity U.S. network, lower prices, create jobs and improve service in rural areas, said John Legere, the chief executive of T-Mobile and the new head of the proposed combined company.
The combined company, which will be called T-Mobile, will invest $40 billion over the next three years to upgrade its networks to accommodate the next generation 5G wireless technology, which is expected to have the speeds necessary to power drones and self-driving cars, Legere said in a statement.
The companies said during a conference call with analysts that the recent U.S. tax overhaul would have a positive impact, and the combined company would not be a significant taxpayer until 2025.
T-Mobile and Sprint said they expected to complete their deal no later than the first half of 2019, an ambitious goal given the intense U.S. regulatory scrutiny it will be subjected to. T-Mobile will not be liable to pay Sprint a breakup fee should regulators block the deal, according to sources who asked not to be identified because that detail in their contract had not yet been made public.
The companies said they expected U.S. regulators would see the benefits of the deal.
“This isn’t a case of going from four to three wireless companies – there are now at least seven or eight big competitors in this converging market,” Legere said, referring to cable companies as wireless competitors. Other companies also would be forced to accelerate their investments in the face of a combined T-Mobile-Sprint, the companies added.
A spokeswoman for Federal Communications Commission Chairman Ajit Pai declined to comment on Sunday on the proposed merger. The FCC will decide whether to grant the deal regulatory approval if it is in the “public interest,” the spokeswoman added.
CTIA, a trade organization that represents the U.S. wireless communications industry, ranks the United States behind China and South Korea in 5G readiness. The Chinese government launched a plan targeting 5G deployment by 2020, with three carriers committed to the timeline.
Legere said the deal would likely lead to lower prices from AT&T and Verizon, as well as Comcast Corp.
AT&T declined to comment. Comcast could not immediately be reached for comment.
Verizon declined to comment on prices but said it remained committed to building a 5G network. – Reuters
