The American Telecom industry is seemingly going through a phase of mergers and consolidations. Two of America’s top Telecom companies, T-Mobile and Sprint will merge and this means that the U.S wireless market will now be dominated by three players instead of four. T-Mobile has inked a deal to buy Sprint Corp at $26 billion. The deal is yet to get a green signal from the antitrust enforcers, though.
Interestingly, this is the third time that T-Mobile and Sprint have talked about merging. Both the companies want to combat the hypercompetitive market as a single entity. The merger of operations is expected to help both the companies to save billions and also tackle the regulatory environment in a much better way. T-Mobile is pegged at a market value of $55 Billion while the sprint is pegged at $60 billion.
As part of the deal, T-Mobile will be exchanging 9.75 Sprint Shares for each T-Mobile shares. This means that T-Mobile will own 42-percent of the new company while the Sprint will own 27%. The new company will be called T-Mobile and the Deutsche Telekom, T-Mobile’s parent company will have voting rights over 69% of the new company and will exercise the same by appointing nine directors out of the 14.
That being said, it is very likely that this deal may end up facing regulatory challenges. Last time around a similar deal between AT&T and Time Warner went sour after it was blocked by the regulatory authorities. This will also put both the stakeholders at risk of having to pay the break-up fee in case the regulatory authorities block the merger. To make the things worse, the regulatory authority had once forced the AT&T and T-Mobile to halt their merger plans in 2011.
Regulatory authorities have already stated in 2014 that having four national providers was necessary to foster the spirit of competition and also usher in innovations. That being said, T-Mobile and Sprint might argue that the merger is the need of the hour, especially with the huge investments with regards to the 5G infrastructure. The companies have already signed a wireless roaming agreement which signals the beginning of infrastructure merging. As part of the deal, the new company will use the T-Mobile’s base in Washington and will designate the Sprint’s Kansas office as a “second headquarters.”