In response to a wave of amalgamation in the telecommunications industry, the nation’s third- and fourth-largest wireless phone operators, Sprint and T-Mobile, have agreed on the terms of a deal to team up. Sprint and T-Mobile have talked about a merger for years but continued to put it off. Each ended up becoming preoccupied with other deals. This led to concerns about scrutiny from antitrust regulators. But in recent days, the two sides have settled on the terms of a $32 billion deal. This is likely to be announced this summer with people being briefed on the matter said on Wednesday. Under the terms of the deal, which are still in its early stages, Sprint would acquire T-Mobile for about $40 a share in cash and stock.
Talks are incomplete and could still fall apart. But the agreement on terms represents a turning point in a relationship between two companies that have long contemplated a merger. Sprint and T-Mobile have decided to press ahead now because their two main rivals, Verizon and AT&T. Each have more than 100 million subscribers and continue to grow more arduous. Verizon’s balance sheet is stronger, after agreeing to take full control of Verizon Wireless last year in a $130 billion deal with Vodafone. Verizon is the largest wireless operator in the country and also provides landlines, cable television and business services. AT&T, the second-largest wireless provider, recently agreed to acquire DirecTV in a $49 billion deal, which would give it control of the country’s largest satellite television operator. Meanwhile, the cable industry is also consolidating.
Comcast and Time Warner Cable have agreed on a $45.2 billion deal that would create by far the largest cable television operator. The combined company would also have strong landline, Internet and business services offerings. Together, these mergers and acquisitions by competitors of Sprint and T-Mobile have created a landscape that has increasingly marginalized the two smaller companies, which each have about 50 million subscribers and only provide wireless service. Neither Sprint nor T-Mobile, on their own, would have the financial resources to compete against these larger players, nor the suite of offerings to attract customers who can get a whole host of services from other rivals. As a result, both sides believe that the only way to remain relevant is to combine.
Mike has a strong fascination for all things business. He currently studies at the NYU Stern School of Business and is intrigued by Economics, Marketing, and Trading.