Report: Sprint, T-Mobile US close to $31B merger deal

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Following last month's report that Deutsche Telekom had accepted Softbank's offer to buy T-Mobile US comes word that Softbank's U.S. carrier Sprint is finalizing details of a merger with T-Mobile.

According to sources familiar with the matter cited by Bloomberg, Sprint will offer cash and stock swap deals for T-Mobile US, with DT retaining about 15 percent of the merged company.

DT currently owns 67 percent of T-Mobile US, with the rest of the stock being publicly traded.

The Softbank/Sprint offer would value T-Mobile US's equity at around $31 billion, according to Bloomberg.

The merger agreement is expected to be finalized next month, but the actual merger is likely to face months of difficult regulatory review given that Sprint and T-Mobile US are the third and fourth largest wireless carriers in the U.S. market behind AT&T and Verizon.

"In order to compete against the big two, AT&T and Verizon, scale is essential. The mobile-phone industry is an industry that needs business investment, so the larger the better," Satoru Kikuchi, an analyst at SMBC Nikko Securities, tells Bloomberg.

Walter Piecyk, an analyst at BTIG Research, agrees. He tells the New York Times: "AT&T and Verizon dominate the industry's Ebitda and capital investment. And [Softbank CEO Masayoshi Son] is making a credible case that they not only need scale to compete more effectively in the wireless industry but could also offer new and needed competition for wired broadband."

Alexandre Iatrides, an analyst with Odde & Cie, gives the merger only a 30 percent to 40 percent chance of passing regulatory muster.

"Even if we take into account the operational recovery that T-Mobile's new management implemented, this is a good price for Deutsche Telekom. In the long run they don't have the size to compete as a standalone company. The amount of capex they'd need to maintain the same quality as AT&T and Verizon would be way too high," Iatrides tells the newswire.

None of the companies are commenting on the merger deal report.

For more:
- see the Bloomberg report
- check out the New York Times article

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