This is the third time the US' third- and fourth-largest wireless carriers have talked about getting together. In 2014, the merger was stopped because the Obama administration made statements that indicated it might not approve the deal.
The companies said during a conference call with analysts that the recent US tax overhaul would have a positive impact, and the combined company would not be a significant taxpayer until 2025. Critics of the deal worry that reducing the number of major carriers in the country from four to three will leave fewer choices for consumers. Both the CEO of SoftBank and Sprint will each have places on the new company's board.
The latest negotiations, coming about five months after an earlier merger attempt collapsed, follow years of will-they-won't-they deliberations. It's possible that, given the breadth of their agreements, T-Mobile and Sprint's MVNO clients will find themselves with more wholesale resources with which to offer even better low-priced wireless LTE, padding New T-Mobile's bottom line as it invests in the next-generation. If both companies merge, then that will create a new contender better capable of taking on AT&T and Verizon. The new company will simply be called T-Mobile, and its current CEO John Legere will also be the head of the new company.
With the news today that T-Mobile plans on merging with Sprint in a transaction valued at $26.5 billion, this could be the end of the road for the Sprint name. Deutsche Telekom will hold a 42% stake in the company, Sprint will hold 27%, and the rest is held by public shareholders.
In addition to this, Softbank and Deutsche Telekom will sign a voting rights agreement.
Both companies will operate independently until the deal receives approval from regulators, which the companies say they anticipate will come during the first half of 2019.
Investors have been anticipating a deal like this for some time.
This isn't the first time that the two companies have attempted a merger. They said that more than 200,000 people will work on behalf of the combined company in the USA if the merger is approved, and it will create jobs by building out a network and retail footprint in areas including rural regions.
"Going from 4G to 5G is like going from black and white to color TV", said Sprint's Claure, Sprint's CEO.
More than 200,000 people will work for the combined company initially, and defying the traditional logic of such mergers, Legere insisted on the call that the new T-Mobile will add thousands of jobs to their combined workforce, spending $40 billion to integrate their operation. Since then, Sprint has amassed more than $30 billion of debts as it has invested in its wireless network and its market valuation has slid. At the end of a year ago, T-Mobile boasted 72.6 million customers while Sprint had 54.6 million connections. Consumers are paying less thanks to resultant price wars.
In comparison, Verizon has 116.2 million connections as of the first quarter, while AT&T boasts 143.8 million, helped by its assets in Mexico.
5G or fifth-generation wireless communication networks would enable services such as smart cities, remote surgery and driverless cars, and would allow customers to experience video and virtual reality with greater ease. Best of all, cable companies and other traditional ISPs will finally have true competition.