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The Sprint Corporation and T-Mobile U.S. Inc plan to announce merger agreement without any immediate asset sales

 

It is common for the companies not to unveil divestitures during merger announcements.

 

Reuters reported last week that some of the U.S. Justice Department’s staff was skeptical about the deal, which would combine the U.S. third and fourth largest wireless carriers.  Of course regulators can only begin reviewing a corporate merger once it has been agreed to and announced.

 

 

T-Mobile and Sprint are preparing a negotiating strategy to stop demands from regulators regarding asset sales, including the divestment of some of their spectrum licenses after their deal is announced.

 

Also, sources added that the companies’ merger agreement expected to come either in late October or early November, will focus on the benefits of the deal for U.S. consumers, including the advancement of next generation 5G wireless technology, which requires large amount of investment.

 

The combination of these two companies will create a business with subscribers over 130 million in USA just behind the Verizon Communications Inc and AT&T Inc.

 

Companies often chose not to make any pre-emptive announcements on divestitures when they announce mergers. If the deal is announced without revealing any  assets that could be divested, then U.S. federal judges could shot down both mergers on antitrust grounds.

 

Companies often choose to place caps in their merger agreements on the size of divestitures they would be willing to accept in their negotiations with regulators. T-Mobile and Sprint have not agreed yet to include such a cap in their merger agreement, though it is possible they will do so, said one of the sources.

 

SPECTRUM HOLDINGS

 

According to John Hodulik UBS research analyst in his research note earlier this month, the U.S. Federal Communications Commission will likely force T-Mobile and Sprint to make some divestitures of spectrum, since the combined company would have the most airwaves in its sector with more than 300 MHz, putting it ahead of Verizon’s and AT&T holdings.

 

  

 

T-Mobile spent $8 billion in a government auction of airwaves earlier this ear. Sprint stayed out of the auction, touting its holdings of high –band spectrum, which it says can move large volumes of information at high speeds.

 

The sources said, companies have not yet introduced a breakup fee in their merger negotiations that would compensate one side if regulators reject the deal, though it is possible one will be agreed to by the time the deal is signed.

 

Sprint shareholders are expected to receive little to no premium in the deal, meaning that Japan’s SoftBank Group Corp, which controls Sprint and other Sprint shareholders will own around a little more than 40 percent of the combined company.

 

T-Mobile majority owner Deutsche Telekom AG and the rest of the T-Mobile shareholders will own the remainder.

 

Still possible the negotiations between these to companies will conclude without a deal, the sources have cautioned.





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