The T-Mobile US (NYSE:TMUS) brand will continue to thrive and the Sprint (NYSE: S) brand will likely take a back seat to T-Mobile if the two companies merge, according to a CNBC report.
The report from CNBC's David Faber, citing unnamed sources, also said that the carriers have agreed to a $2 billion breakup fee. That fee would be paid to T-Mobile if the deal is rejected by regulators. That's higher than the Wall Street Journal report earlier this month that said that Sprint would pay T-Mobile $1 billion in cash and other assets if the deal is blocked. The new CNBC report also said the deal might be announced in late July or early August.
Sprint and T-Mobile representatives declined to comment.
Speculation that the two carriers are nearing a deal has escalated this month despite that fact that there has been no official agreement. Reports have said that Sprint is prepared to pay $32 billion for T-Mobile and, according to Bloomberg, T-Mobile CEO John Legere has been tapped to lead the combined company.
The CNBC report also said that Legere and his management team would be in charge. It's unclear if Sprint CEO Dan Hesse would leave the company. He has said previously that he would OK with not being CEO.
Making T-Mobile the surviving brand could have wide-ranging consequences, especially because Sprint has sponsorships such as the NASCAR Sprint Cup Series. However, it likely reflects the success of T-Mobile's "uncarrier" branding strategy. The company has made great strides with its decisions to pay the Early Termination Fees for customers who switch from other operators to T-Mobile. T-Mobile added 2.4 million total customers, including 1.3 million branded postpaid subscribers, in the first quarter, the most of any U.S. carrier.
Meanwhile, Sprint has been hampered by its network modernization, which has resulted in high churn rates. In addition, its rollout of its tri-band Spark LTE service has been slower than some investors would like.
The deal still faces long odds with regulators at the FCC and Department of Justice, which have stated their desire to maintain four national wireless competitors. The core of the argument is that Sprint parent SoftBank and its CEO Masayoshi Son would likely make is that there are really three behemoths in the U.S. telecommunications market: Comcast (NASDAQ: CMCSA), AT&T (NYSE: T) and Verizon Communications (NYSE: VZ), and that by allowing Sprint and T-Mobile to combine, the merged company would serve as a counterweight to the other companies and provide more competition. The argument could carry weight as the FCC also contemplates proposed mega-deals between AT&T and DirecTV (NASDAQ: DTV) and Comcast and Time Warner Cable (NYSE: TWC).
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