T-Mobile wants to pay less than $40 billion for Sprint now that its proposed acquisition has fully completed its regulatory hurdles. Analysts say the price may go down some, but not a lot. The merger between the third and fourth largest U.S. wireless carriers was agreed to in April 2018, but couldn’t close after several states challenged it in court on antitrust grounds. A federal judge gave the companies the green light Tuesday to complete the deal, Inside Towers reported.
T-Mobile hopes it will close by April 1. Before then, T-Mobile parent, Deutsche Telekom AG, plans to ask Sprint’s majority owner, Japan’s SoftBank Group, to agree to a lower price, reported Reuters. Deutsche Telekom AG will argue Sprint’s financial position has deteriorated in the two years since the original merger deal was made.
The market is assuming an approximately nine percent cut to the deal price, Cowen analysts wrote in a research note.
T-Mobile has plenty of arguments it can use in a renegotiation with Sprint. Cowen analysts said Sprint’s market share in subscribing phone customers is down from 12.4 percent at the start of 2018 to 11.8 percent in the third quarter of 2019, as it lost 400,000 customers. Meanwhile, its debt rose from $33 billion to $34.1 billion. SoftBank is struggling to raise money from investors for its second $100 billion Vision Fund, as high-profile bets on start-ups such as WeWork backfired, according to Reuters.
But T-Mobile won’t want to lose the Sprint deal, because it needs the merger, including Sprint’s spectrum, to take on bigger rivals Verizon Communications and AT&T in the race for 5G, analysts said. “The only credible fallback is if T-Mobile says they’re willing to walk away, and I don’t think anyone would take them seriously,” said Craig Moffett, a telecom analyst at MoffettNathanson.
“The primary leverage Sprint has is that T-Mobile’s growth and pending launch of 5G makes that spectrum depth very important to T-Mobile,” said LightShed Partners analyst Walt Piecyk. “I would not be shocked if there was no change in price, because it’s been such a lengthy process, and the demand for spectrum continues to rise.”