Reuters, quoting the ever popular “person familiar with the matter,” reports that Sprint is set to buy T-Mobile US Inc in a deal worth more than $32 billion. The deal would merge the third and fourth-largest U.S. mobile carriers, making the resulting carrier instantly more competitive with AT&T and Verizon.
Sprint is reportedly ready to pay $40 per share for T-Mobile, a 17% premium over the company’s closing share price on Wednesday.
However, Hannes Wittig, an analyst at JP Morgan, said the $40 price, if confirmed, seemed low.
“T-Mobile US should be worth more than that given that the synergies should exceed $20 billion, Deutsche Telekom would share some of the execution risk and Sprint would be getting control … Somewhere in the high 40s would be more appropriate,” he said.
Sprint’s parent firm, Japan’s Softbank, and Deutsche Telekom DTEGn.DE, which owns 67% of T-Mobile, still have yet to work out the details, including the financing, and any termination fee to be paid if the merger is blocked by regulators, says Reuters source.
Regulatory approval could be the biggest hurdle for the deal, as both the U.S. Federal Communications Commission (FCC) and Department of Justice (DOJ) have expressed a desire to have at least two more wireless operators competing with market leaders AT&T and Verizon.
Regulators rejected a bid by AT&T to acquire T-Mobile US three years ago, which resulted in AT&T paying Deutsche Telekom a break-up fee of $6 billion in cash and mobile assets.
If the sale is approved, Deutsche Telekom is expected to keep a 15 to 20% stake in the combined company, the source said.
Officials at Sprint, Softbank and Deutsche Telekom declined to comment. T-Mobile US did not respond to Reuters’ requests for comment.