Boston, MA 06/06/2014 (wallstreetpr) – Sprint Corp agreed on the terms to buy T-Mobile US Inc (NYSE:TMUS) at a cost of around $40 per share. This paved way for progress in attempt of one of the biggest mergers of the third and fourth largest mobile network operators of the U.S. If the proposed sale is conceptualised, it is expected that Sprint would keep 15-20% stake in the merged company.
What does the $40 price represent?
The $40 per share offered by Sprint represented that T-Mobile US Inc (NYSE:TMUS) would be eligible to 17% premium on closing share price on June 4, 2014. This also meant that the valuation became over $32 billion. In the meanwhile, the research analyst at JP Morgan explained that if this price was confirmed, it was quite low. Hannes Wittig of JP Morgan said that TMUS was worth more because the synergies are predicted to exceed $20 billion.
Hurdle in the Deal
Analysts explain that there is the regulatory challenge which might act as an obstacle in the deal. The two companies would face hindrance because Department of Justice (DOJ) as well as U.S. Federal Communications Commission (FCC) have already expressed that there should be two more network operators to compete against AT&T as well as Verizon.
Before moving ahead in their merger plan, it would be important for both Sprint as well as T-Mobile US Inc (NYSE:TMUS) to convince the U.S. regulators completely over the deal. Both these companies are aware that the regulatory agencies have already tipped their hands. It is therefore important for them to put forth stronger arguments in order to battle with the agencies. Calculations will have to be done in order to save the two from repercussions later.
Nomura analyst Adam Ilkowitz explained that the odds of getting approval for the deal from Department of Justice (DOJ) and Federal Communications Commission (FCC) are quite low until and unless landscape concessions are put on the podium.
