Analyst: Sprint Could Lose Nearly $9B In Value If Merger Fails
On Sunday, Sprint and T-Mobile announced that the two companies had signed an agreement to merge, with the latter paying $26 billion for Sprint. Today, analysts, as well as the CEO's of both companies, have been doing interviews before the stock market opened up this morning. Craig Moffett from MoffettNathanson was on CNBC this morning talking about the merger, and Moffett believes that if the deal falls through, that Sprint could lost nearly a third of its market cap or around $9 billion. That means that the stock could drop to $4. This morning, Sprint's stock opened down around 13-percent on the news of the merger yesterday.
Moffett also said that he believes there is a 50/50 chance that the government approves of this merger. This is a merger that the four companies (T-Mobile and its parent company Deutsche Telekom, Sprint and its parent company SoftBank) have been talking about for many years. It had attempted to merge under the Obama Administration, but the FCC and Justice Department told the companies that it would get blocked. Now under the Trump Administration the companies believe that the deal will be approved, especially with Trump running on the fact that he would cut regulation – and has done so since taking office. The two companies are touting that combining would give the US the push it needs to jump into 5G first, and become a leader in the new technology – beating China and South Korea. That's an argument that Trump is going to, undoubtedly, like.
Neither Sprint nor T-Mobile have stated how long it expects for a review of this merger to take place, and when the deal should close. But it could be at least a year or more. Of course, the AT&T/Time Warner merger is going to set precedent for this merger between Sprint and T-Mobile. And that trial is set to end this week, with closing arguments taking place today. Neither company has announced the details of this deal either, so it's unclear what the break-up fee might be, if the deal were to fall through. But remember when AT&T attempted to buy T-Mobile in 2011, it had a pretty absurd break-up fee, which sent a pretty big check over to T-Mobile along with plenty of spectrum.
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