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T-Mobile (TMUS) Acquires Sprint to Accelerate 5G Deployment

T-Mobile (TMUS) Acquires Sprint to Accelerate 5G Deployment

T-Mobile US, Inc. TMUS and Sprint Corporation S recently announced a deal to merge in all-stock transaction at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share, or the equivalent of 9.75 Sprint shares for each T-Mobile share, based on the closing share price on Apr 27.

This represents a total implied enterprise value of approximately $146 billion for the combined company, which will be named T-Mobile. The merger will create thousands of jobs and will likely help the United States to beat China in creating the next generation mobile network.

In order to get approval for their $26.5 billion agreement, T-Mobile and Sprint need to convince the Trump administration’s antitrust regulators that there is plenty of competition for wireless service beyond Verizon Communications Inc. VZ and AT&T Inc. T, the top two wireless players. The merger would significantly reduce the number of players in the industry to three leading carriers. The previous merger talks had ended unsuccessfully in 2014 after the Obama administration expressed antitrust concerns. The Federal Communications Commission will decide whether to grant the deal regulatory approval and if it is in public interest.

The deal would help to accelerate development of faster 5G wireless networks and ensure that the United States does not cede leadership on the technology to China. The companies expect the deal to close by the first half of 2019 and result in about $6 billion in annual cost savings.

The combined company would have about 127 million customers. It will have a strong closing balance sheet and a fully funded business plan with a strong foundation of secured investment grade debt at close. It will be a force for positive change in the U.S. wireless, video and broadband industries.

The new T-Mobile will have the network capacity to rapidly create a nationwide 5G network with the breadth and depth needed to enable U.S. firms and entrepreneurs to continue leading in the 5G era.

The combination of spectrum holdings, resulting network scale and expected run rate cost synergies of more than $6 billion, which represent a net present value of more than $43 billion, will supercharge T-Mobile’s Un-carrier strategy to disrupt the marketplace and lay the foundation for U.S. companies and innovators.

Over the past three months, both T-Mobile and Sprint stocks have outperformed the industry. Sprint’s shares have gained 21.9% while T-Mobile shares have lost 0.9% compared with the industry’s decline of 5.4% in the same time frame.

Both T-Mobile and Sprint carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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