Hidden message from investors: T-Mobile will not close on its current merger deal with Sprint
Earlier this year, we introduced you to a method that determines how optimistic Wall Street is about the T-Mobile-Sprint merger closing. This figure can be calculated by taking the price of T-Mobile’s shares (ticker symbol: TMUS) and multiplying that number by 0.10256. That gives you the value of T-Mobile stock that each Sprint shareholder will receive in the merger (unless the terms of the deal change, more on that later). Subtract Sprint’s stock price (ticker symbol: S) from that figure and that is the so-called “spread.” The smaller the spread, the more optimistic traders are that the deal will close.
The big question: can Dish replace Sprint to keep the competitive landscape unchanged?
Gallant, a former FCC legal adviser, wrote that “Both the parties’ private texts and (Judge) Marrero’s questions repeatedly referred to this as a ‘four to three’ merger. The analyst says that this means the states “probably met their initial burden of proof.” On the other hand, the judge did not appear to be convinced that a 25% reduction in the number of major carriers will automatically lead to higher prices in the industry. States’ witness Carl Shaprio, an economics professor at the University of California at Berkeley, testified that the merger could cost consumers $ 8.7 billion in additional costs. Judge Marrero asked Shapiro whether the carriers would “be so bold” as to raise prices in the aftermath of the merger without an accompanying rise in the service provided.
Investors are not optimistic that the T-Mobile-Sprint deal will close in its present form
The lawsuit being tried in front of the judge was filed by several state attorneys general and the attorney general of Washington D.C. In November, the states of Nevada and Texas settled with T-Mobile and both of those states pulled out of the lawsuit. The $ 26.5 billion question is whether Judge Marrero is confident that the deal between Sprint and Dish Network will result in turning the latter into the “fourth nationwide facilities-based network competitor.” Once the merger between T-Mobile and Sprint is closed, Dish Network will pay $ 5 billion for all of Sprint’s pre-paid businesses including Virgin Mobile and Boost Mobile. The units has over 9.3 million subscribers. As part of the $ 5 billion deal with Sprint, Dish will get the first crack at any networking equipment or retail assets divested by the combined T-Mobile-Sprint.
The deal with Dish also will give T-Mobile the opportunity to lease some additional 600MHz spectrum from Dish. While T-Mobile spent $ 7.99 billion to win 31MHz of low-band 600MHz airwaves in a 2017 FCC auction, Dish was the second biggest spender shelling out $ 6.2 billion.
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Read more here: PhoneArena