Coverage: T-Mobile and Sprint agree to $26 billion deal

T-Mobile US Inc. and Sprint Corp. on Sunday agreed to a $26 billion all-stock deal and argued 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.

Greg Roumeliotis, Sheila Dang and Liana B. Baker of Reuters had the news:

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.

David Z. Morris of Fortune reported that the two companies would be able to roll out a high-speed 5G wireless network:

The combined company, according to an announcement, will retain the T-Mobile name and be headquartered in Bellevue, Wash. John Legere, current head of T-Mobile, will also be CEO of the new company.

The merger will be an all-stock deal, exchanging 9.75 Sprint shares for each T-Mobile share. That would create a company with an approximately $146 billion valuation, largely focused on wireless data services. Competitor Verizon currently has a total market cap of $211 billion, but that also includes substantial fiber-optic and television operations. AT&T, which also provides wireless along with many other services, is valued at around $216 billion.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could on its own,” Legere said in a statement.

The combined companies will, according to the announcement, “employ more people than both companies separately.”

Nabila Ahmed and Scott Moritz of Bloomberg News reported that the two companies combined would be No. 2 behind Verizon:

Operating as T-Mobile, the company would have about $74 billion in annual revenue and 70 million wireless subscribers. Verizon is the largest U.S. carrier with $88 billion in 2017 wireless revenue and 111 million subscribers, and AT&T would be No. 2 with $71 billion in wireless revenue and have 78 million regular subscribers.

The combination values each Sprint share at 0.10256 of a T-Mobile share, the companies said in a statement Sunday, or about $6.62 a share based on T-Mobile’s Friday closing price of $64.52. The ratio was originally fixed based on T-Mobile’s share price at the close on April 9, before news of the renewed talks emerged, and would have valued Sprint at $6.13 a share based on that price, one of the people said. News of the talks sent both companies’ stocks surging, adding to the valuation of the deal. Sprint closed Friday at $6.50 a share.

The implied enterprise value is about $59 billion for Sprint and $146 billion for the combined companies, according to the statement.

Under terms of the deal, Deutsche Telekom will end up with a 42 percent ownership stake while SoftBank will have 27 percent. T-Mobile’s Mike Sievert will be president and chief operating officer. The German company’s chairman, Tim Hoettges, will serve in that role at the combined company, and the board will include SoftBank Chief Executive Officer Masayoshi Son.