 "T-Mobile, Sprint zeroing in on a $32-billion merger")
Responding to a wave of consolidation in the telecommunications industry, the nation's third- and fourth-largest wireless phone operators have agreed on the terms of a deal to join forces. Sprint and T-Mobile have talked about a combination for years but continued to put it off, each preoccupied with other deals, and concerned about scrutiny from antitrust regulators.
But in recent days, the two sides have settled on the terms of a $32-billion deal that is likely to be announced this summer, people briefed on the matter said on Wednesday.
Under the terms of the deal, which are still preliminary, Sprint would acquire T-Mobile for about $40 a share in cash and stock, a 17 per cent premium to Wednesday's price.
Talks are incomplete and could still fall apart. But the agreement on terms represents a turning point in a relationship between two companies that have long contemplated a merger.
Sprint and T-Mobile have decided to press ahead now because their two main rivals, Verizon and AT&T, each with more than 100 million subscribers, continue to grow more formidable. Verizon's balance sheet is stronger, after agreeing to take full control of Verizon Wireless last year in a $130-billion deal with Vodafone. Verizon is the largest wireless operator in the country and also provides landlines, cable television and business services.
AT&T, the second-largest wireless provider, recently agreed to acquire DirecTV in a $49-billion deal, which would give it control of the country's largest satellite television operator.
Meanwhile, the cable industry is also consolidating. Comcast and Time Warner Cable have agreed on a $45.fg2-billion deal that would create by far the largest cable television operator. The combined company would also have strong landline, Internet and business services offerings.
Together, these mergers and acquisitions by competitors of Sprint and T-Mobile have created a landscape that has increasingly marginalised the two smaller companies, which each have about 50 million subscribers and only provide wireless service.
Neither Sprint nor T-Mobile, on their own, would have the financial resources to compete against these larger players, nor the suite of offerings to attract customers who can get a whole host of services from other rivals. As a result, both sides believe that the only way to remain relevant is to combine.
Sprint and T-Mobile are both majority-owned by large, international telecommunications groups, which have their own agendas as well. T-Mobile is 67 per cent owned by Deutsche Telekom of Germany. Last year, T-Mobile merged with MetroPCS, gaining a publicly traded stock that eased the path for a Sprint deal.
Deutsche Telekom has been looking to get out of its T-Mobile investment for years, and under the proposed deal with Sprint it would own just 20 per cent of the combined firm, further reducing its United States exposure.
Sprint, meanwhile, is majority-owned by SoftBank, the Japanese group controlled by the billionaire Masayoshi Son. Son, known as Masa, an entrepreneur who has already reshaped Japan's wireless industry, has made no secret of his ambitions to do the same thing in the United States. Taking control of Sprint last year was his first step, and at the time that deal was announced, he acknowledged his desire to acquire T-Mobile as well, giving him the scale he thinks he needs to compete with Verizon and AT&T.
©2014 The New York Times News Service
But in recent days, the two sides have settled on the terms of a $32-billion deal that is likely to be announced this summer, people briefed on the matter said on Wednesday.
Under the terms of the deal, which are still preliminary, Sprint would acquire T-Mobile for about $40 a share in cash and stock, a 17 per cent premium to Wednesday's price.
Talks are incomplete and could still fall apart. But the agreement on terms represents a turning point in a relationship between two companies that have long contemplated a merger.
Sprint and T-Mobile have decided to press ahead now because their two main rivals, Verizon and AT&T, each with more than 100 million subscribers, continue to grow more formidable. Verizon's balance sheet is stronger, after agreeing to take full control of Verizon Wireless last year in a $130-billion deal with Vodafone. Verizon is the largest wireless operator in the country and also provides landlines, cable television and business services.
AT&T, the second-largest wireless provider, recently agreed to acquire DirecTV in a $49-billion deal, which would give it control of the country's largest satellite television operator.
Meanwhile, the cable industry is also consolidating. Comcast and Time Warner Cable have agreed on a $45.fg2-billion deal that would create by far the largest cable television operator. The combined company would also have strong landline, Internet and business services offerings.
Together, these mergers and acquisitions by competitors of Sprint and T-Mobile have created a landscape that has increasingly marginalised the two smaller companies, which each have about 50 million subscribers and only provide wireless service.
Neither Sprint nor T-Mobile, on their own, would have the financial resources to compete against these larger players, nor the suite of offerings to attract customers who can get a whole host of services from other rivals. As a result, both sides believe that the only way to remain relevant is to combine.
Sprint and T-Mobile are both majority-owned by large, international telecommunications groups, which have their own agendas as well. T-Mobile is 67 per cent owned by Deutsche Telekom of Germany. Last year, T-Mobile merged with MetroPCS, gaining a publicly traded stock that eased the path for a Sprint deal.
Deutsche Telekom has been looking to get out of its T-Mobile investment for years, and under the proposed deal with Sprint it would own just 20 per cent of the combined firm, further reducing its United States exposure.
Sprint, meanwhile, is majority-owned by SoftBank, the Japanese group controlled by the billionaire Masayoshi Son. Son, known as Masa, an entrepreneur who has already reshaped Japan's wireless industry, has made no secret of his ambitions to do the same thing in the United States. Taking control of Sprint last year was his first step, and at the time that deal was announced, he acknowledged his desire to acquire T-Mobile as well, giving him the scale he thinks he needs to compete with Verizon and AT&T.
©2014 The New York Times News Service