T-Mobile and Sprint are reportedly finalizing a proposed merger that could be announced by the end of the month. And the agreement isn’t expected to include a breakup fee in case the deal falls through.
Bloomberg reported the two carriers “are putting the finishing touches” on the tie-up and are looking to officially announce the agreement when they report quarterly earnings in a few weeks. The companies are still negotiating an exchange ratio for the all-stock deal to determine Sprint’s valuation, according to the report, which cited unnamed “people familiar with the matter.”
Interestingly, a breakup fee isn’t expected to be included in any final pact, which minimizes risks for both carriers should the deal not gain approval from federal regulators. The lack of a breakup fee would enable both carriers to urge regulators to give the merger a green light without facing any conflicts of interest, Bloomberg noted.
AT&T had to pay a record breakup fee worth $6 billion in 2011 when its plan to spend $39 billion to acquire T-Mobile fell through after facing pushback from federal regulators. The larger carrier had to fork over $3 billion in cash and a seven-year roaming agreement that allowed T-Mobile to expand its coverage by roughly 20%. Perhaps even more important was the AWS spectrum AT&T handed over to the smaller carrier in 128 markets, including 12 of the top 20 markets in the United States.
The election of President Donald Trump coupled with the conclusion of the FCC’s incentive auction several months ago has given rise to a flurry of speculation regarding potential M&A activity in the mobile market. And much of that talk has centered on some kind of merger between the nation's two smaller major wireless carriers.
SoftBank spent more than $20 billion to acquire Sprint in 2012, and the company had hoped to acquire T-Mobile as well, merging the carriers to take on Verizon and AT&T. That effort was dropped when U.S. regulators indicated they were opposed to a merger, however.
Analysts say a deal would make sense in several ways. The carriers’ spectrum holdings are complementary—T-Mobile is in the process of expanding its coverage through the 600 MHz airwaves it recently won at auction, while Sprint sits on an enormous pile of 2.5 GHz spectrum that T-Mobile openly covets—and the move would result in three dominant network operators of similar size. Meanwhile, T-Mobile’s momentum over the last three years is undeniable, and Sprint continues to struggle to gain its financial footing even as it gains market share.