What a difference a couple of years have made under John Legere. Back in 2014 when Sprint was reportedly looking to merge with T-Mobile, they were reportedly going to spend around $32.4 billion to pick up the company from Deutsche Telekom. Now, about three years later, Wells Fargo analysts believe that Sprint would need to spend a whopping $93.4 billion to buy T-Mobile and merge the two companies. That's nearly triple what they would have paid just three years earlier.
According to Wells Fargo's Jennifer Fritzsche, this price tag would be about 8.5 times Sprint's estimated EBTIDA for their 2017 fiscal year. Which also means that this deal would really no longer make financial sense for Sprint. She explained that this "values T-Mobile equity at $72 a share, or a 28% premium to its latest closing price. Sprint could assume T-Mobile's $33 billion in net debt and would then need to raise $60 billion in debt and equity to fund the remaining purchase price." While the price tag is much higher than it was three years ago, and some analysts think that this wouldn't be a good deal for Sprint or SoftBank, Fritzsche believes it could still be a good deal. Considering the fact that the two companies could cut plenty of costs. Not to mention the fact that their spectrum portfolios compliment each other pretty well.
SoftBank's CEO and Sprint chairman, Masayoshi Son admitted recently that his plan after buying Sprint was to then purchase T-Mobile and merge the two together to compete with Verizon and AT&T, who are both twice the size of the smaller carriers. But the FCC did not want this to happen, as they continued to tell Son that they wanted at least four national carriers, and this obviously would leave them with just three. But many believe with a Republican FCC, that a merger could be on the table. Although we still won't know for sure until the new FCC takes office in January.
SoftBank will have to do plenty of fundraising to get the $93.4 billion price for T-Mobile, considering they were borrowing from a slew of banks to pick them up in 2013 for just $32.4 billion. Looking back, that asking price seemed like an absolute steal. However, in those three years (Sprint reportedly began courting a T-Mobile merger in December of 2013), a lot has happened in the wireless industry. T-Mobile has switched positions with Sprint, moving to being third in the US. They have also added millions and millions of customers to their network. Which is what has drove up the price for T-Mobile. Additionally, Deutsche Telekom may not be looking to sell T-Mobile USA now, as they are their most lucrative company, at this point.