Boston, MA 03/11/2014 (wallstreetpr) – Speculation is ripe in the telecom industry on the purported merger between Sprint Corporation (NYSE:S) and T-Mobile US Inc. (NYSE:TMUS). Sprint Corporation Chief executive Officer has already come out to confirm that his company is more than ready and willing to add T-Mobile under its portfolio.
The merger is expected to be the third largest in the telecom industry sure to give the big players in the industry a run for their money in terms of increased competition. This comes at the back of Sprint CEO saying, he would love to buy the smaller wireless carrier T-Mobile US Inc. (NYSE:TMUS) despite the increasing opposition from regulators in the industry.
AT&T Inc. (NYSE:T) had made an offer to acquire T-Mobile US Inc. (NYSE:TMUS) back in 2011 but its advances were thwarted by the authorities, this essentially leaves a lot to be seen of what verdict Sprint will get from the same authorities. The merger if it goes through will give the two entities enough capacity and infrastructure to deliver quality services to customers while at the same time minimizing on costs of operations.
The merger of the two companies will result in an entity with a market cap worth $60 billion that will still lag behind that of Verizon Communications Inc. (NYSE:VZ)’s $196 billion and AT&T Inc. (NYSE:T) $168 billion. The entity will also command a total membership subscription of 56.7 million.
Implications of the merger
Technical integration between the two companies could end up being a daunting hurdle considering the two companies use completely different technologies for their wireless networks. Sprint Corporation (NYSE:S) has been carrying out capital investments such as its Network Vision which is a three year project aimed at expanding its 4G LTE service coverage.
T-Mobile US Inc. (NYSE:TMUS) has on the other hand carried out 4G LTE technology expansion that now covers over 260 destinations in the U.S. The technologies used in the two companies are completely different with Sprint using CDMA while T-Mobile uses LTE and GSM.
Debt management will be another hurdle for the merger as it will result in a total combined debt of $19 billion that will be extremely difficult to leverage. Sprint Corporation (NYSE:S)’s debt to equity ratio currently stands at 129% with the merger expected to be carried out on a cash only basis estimated to be worth $26 billion.
