Another obstacle in the T-Mobile/Sprint merger is no more, as both carriers have reached new merger agreement terms.
T-Mobile Sprint merger agreement terms are updated
The new merger agreement is essentially a revision of the old one that expired on November 1st. Under the new merger terms, T-Mobile parent Deutsche Telekom (DT) will possess 43-percent of New T-Mobile shares, Sprint's owner SoftBank 24-percent, with public shareholders owning the remaining 33-percent. The old merger agreement saw Deutsche Telekom with around 42-percent of all shares while SoftBank would own 27-percent and public shareholders owning 31-percent. As for the exchange ratio, Sprint's share exchange ratio increases from 9.75 to 11.00 with the new agreement. Outside of Softbank, Sprint shareholders will receive the former 9.75 exchange ratio for Sprint shares versus T-Mobile shares.
Why a new merger agreement?
What is the reason behind the new merger agreement? As is shown above, T-Mobile acquires more shares, as do public shareholders, in the new plan. Formerly, Sprint emerged with more shares. The new agreement, then, reduces Sprint's shares in the new company. Why, though? Well, the answer is found in the decline of Sprint shares since the merger's approval. According to Deutsche Telekom, Sprint shares have dropped in price since the merger proposal in 2018.
Two is better than one: the case for a T-Mobile/Sprint merger
The new merger agreement continues the goal of both T-Mobile and Sprint to combine forces. Some still wonder about the purpose behind the desire to merge. With Sprint as the fourth-largest carrier in the US, and T-Mobile as the third-largest carrier, the two bottom carriers of the four merging doesn't exactly help the supercarrier surpass Verizon or AT&T.
So, if these two cannot surpass the top Two, why merge at all? The answer is simple: a merger is the only way to take on the two and at least attempt to rival them. Alone, Sprint is crippling in profit and user base. T-Mobile, though it has a rising subscriber base, doesn't have the spectrum alone to reach rural areas. Sprint has the mid-band spectrum that T-Mobile craves, and T-Mobile has the subscriber base and financial resources that Sprint doesn't have. Sprint CEO Marcelo Claure already said in a 47-page letter presented to the FCC that without the merger, Sprint wouldn't survive. The new merger would give The New T-Mobile a subscriber base of 80 million customers, up 5 million on AT&T but still less than Verizon's 100+ million customers.
T-Mobile's promises: 5G in rural areas, job growth, fixed 3-year term for prices
T-Mobile is further ahead in the new merger than it started due to certain promises it has made to the Federal Communications Commission (FCC). Among these, T-Mobile promises that it will bring 5G to rural areas via broadband. For those who cannot access cellular connectivity, T-Mobile intends to bring broadband so that low-income families can access its blazing-fast data speeds. Rural areas are the most neglected in the current wireless market, with the top four carriers being heavily accessible only in metropolitan areas and major cities. T-Mobile says the next battle is in rural areas, and it intends to get there first — ahead of AT&T and Verizon.
Next, Magenta says it will create 11,000+ jobs by 2024. Of course, no merger comes without losing jobs, so this news is a bit bittersweet. Last but not least, T-Mobile vows to keep prices at their current level up to three years post-merger.
T-Mobile also promises to offload Sprint's Boost Mobile and other prepaid brands to DISH Network. DISH can then use the stores and brands it receives from T-Mobile to create a fourth wireless carrier. And, of course, let's not forget that DISH will be able to use T-Mobile's network for 7 years post-deal. DISH's new acquisitions are proving tempting to Google, whose Fi network mandates leasing fees to T-Mobile and Sprint. Should Google and DISH team up, Google would have 7 years free of leasing fees for network spectrum.
The T-Mobile/Sprint merger has received both FCC and DoJ approval. Up until recently, it had to escape the ten states' lawsuit against it. The lawsuit has been dismissed.
The new merger agreement has an outside date of July 1st, 2020 and could close as soon as April 1st.