Tue, May 01, 2018 - Page 10 News List

T-Mobile to buy Sprint for US$26.5bn

ELIMINATING COSTS:The companies expect synergies of about US$43 billion and are planning to decommission 35,000 overlapping cell sites while keeping dual headquarters

Bloomberg

T-Mobile US Inc agreed to acquire Sprint Corp for US$26.5 billion in stock, a wager that the carriers can team up to build a next-generation wireless network and get a jump on industry leaders Verizon Communications Inc and AT&T Inc.

The deal follows years of deliberations between Deutsche Telekom AG, the German company that controls T-Mobile, and Softbank Group Corp, the Japanese owner of Sprint, and comes about five months after an earlier merger attempt collapsed.

The combination reduces the US wireless industry to three major competitors from four, ensuring heavy scrutiny from regulators.

“We are going to have an impact on America,” John Legere, the T-Mobile boss who is to serve as chief executive officer of the combined entity, said on a conference call on Sunday.

Rivals, such as Verizon, AT&T and Comcast Corp, would have to respond, he said. “We are going to drag the rest of the players kicking and screaming to the prize, which is American leadership” in fifth-generation (5G) wireless networks.

Operating as T-Mobile, the company would have about US$74 billion in annual revenue and 70 million wireless subscribers.

Verizon is the largest US carrier with US$88 billion wireless revenue and 111 million subscribers last year, and AT&T would be No. 2 with US$71 billion in wireless revenue and 78 million regular subscribers.

The combination values each Sprint share at 0.10256 of a T-Mobile share, the companies said in a statement on Sunday, or about US$6.62 a share based on T-Mobile’s Friday closing price of US$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 US$6.13 a share based on that price, a person familiar with the matter said.

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

Under terms of the deal, Deutsche Telekom is to end up with a 42 percent ownership stake, while Softbank is to have 27 percent.

T-Mobile’s Mike Sievert is to be president and chief operating officer.

Deutsche Telekom chairman Tim Hoettges would serve in that role at the combined company, and the board would include Softbank chief executive officer Masayoshi Son.

The companies said they expect synergies of about US$43 billion based on net present value, with more than US$6.5 billion on a run-rate basis, with most of the savings coming from network spending.

Combining networks would eliminate costs to upgrade and operate one of the networks, and by consolidating overlapping properties the new company can vacate unnecessary antenna towers.

The new company plans to decommission 35,000 cell sites, T-Mobile chief technology officer Neville Ray said.

Unlike other mergers that achieve cost savings by eliminating duplicate staff, the executives plan to keep dual headquarters in Bellevue, Washington, and Overland Park, Kansas.

Sievert said the combined worldwide workforce of about 240,000 employees would increase once the merger is complete.

Most of the new jobs would be network-related, many in rural areas where network expansion is planned.

The deal marks the third time that Son has acted on his long-held plan to combine Sprint and T-Mobile.

Previous negotiations broke down after the two sides could not agree on how to structure control of the combined entity, people familiar with the matter said at the time.

This story has been viewed 1316 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top