Economic News

Sprint and T-Mobile Announce Merger Plans

After months of rumors and failed attempts, Sprint and T-Mobile announced on Sunday that the two companies had arrived at a merger deal. By combining the nation’s third and fourth largest mobile carriers, the New T-Mobile — as it’s being called — would become the second largest carrior behind only Verizon, edging out AT&T. As CNN Money reports, Sprint is currently valued at $26 billion while T-Mobile was last valued at $55 billion.

In a video announcing and detailing the deal, T-Mobile CEO John Legere (who will also lead the merged company) and Sprint CEO Marcelo Claure made a case for why their merger plans would be good for consumers and why it should be approved by regulators. Among the points they make in the seven-minute clip, Legere says the combined company will be the only telecom equipped to quickly create a nationwide 5G network and keep up with competing countries. Additionally the duo says the merger will create new American jobs, with Legere pointing to his company’s acquisition of Metro PCS five years ago as proof of his theory. Meanwhile Claure highlighted what other telecoms are currently doing, arguing that it’s no longer the Big Four but the “Big Seven or Eight.” On a similar note the CEOs said their merger could help spur greater investments by their competitors. Lastly Legere asserted that the deal would benefit customers and businesses in rural areas by bringing them better coverage and greater competition.

Overall the points made in the video seemed clearly tailored to the Trump administration. Despite those overtures many are still questioning whether the deal will ultimately pass regulatory muster. Among them Georgetown Law professor Andrew Schwartzman thinks the merger will have regulatory hills to climb, noting that similar plans by the two companies were scrapped in 2014 over such concerns. He told CNN Money, “It will be difficult to convince the Justice Department that circumstances have changed so much that it’s necessary to go down to three providers. That’s the major hurdle that has to be confronted.” Similarly BTIG analyst Walter Piecyk pegged the odds of approval at 40% during a recent CNBC appearance. He went on to say that a failed deal could be bad news for Sprint, which he suspects will lose one-third of its value if the merger is blocked. It should also be noted that both T-Mobile and Sprint stocks were down this morning as a result of yesterday’s announcement.

With news of the T-Mobile and Sprint merger finally moving forward, there are now several major mergers and acquisitions in the pipeline that all present their own challenges. For example the Disney-21st Century Fox deal asks regulators to consider how the changing media landscape affects more traditional media players while many wonder what the CVS-Aetna merger will even look like when all is said and done. In many of these cases, the companies looking to merge claim the results will be increased competition while their opponents argue the opposite will be true. As a result it will be interesting to see which if any of these mega-mergers make it past regulators and why. One thing’s for sure, though: both T-Mobile and Sprint will be paying very close attention to what happens with the AT&T-Time Warner deal and some of the other mergers regulators are currently scrutinizing.

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