US telecoms companies, T-Mobile and Sprint are reportedly laying further groundwork for their merger. A Reuters report Wednesday, quoting ‘sources’, suggests both companies are in the process of creating special committees of board directors, to decide on the details of the merger.
T-Mobile shares closed 1.32% higher in Tuesday’s US trading session. Sprint ended the day 2.2% in the green. And, afterhours activity suggests shares could open higher again.
The US’ third and fourth largest wireless providers, have both concluded that the stock merger wouldn’t be subject to approval from minority shareholders.
Tie-Up could end in big job losses
Sprint majority owners Softbank and T-Mobile’s main controlling owner, Deutsche Telekom, have stated the merger is the best way for them to keep up with their larger US rivals, Verizon and AT&T Inc.
Indeed, Braxton Carter, T-Mobile’s US Chief Financial Officer, has estimated the merger could produce cost savings of some $30 billion.
However, the Communication Workers of America union, (CWA) has warned the move could place up to 20,000 jobs in jeopardy.
“Allowing Sprint and T-Mobile to merge guarantees the loss of tens of thousands of US jobs that would result from store closures and the consolidation of administrative work,” said CWA President Chris Shelton, as he called for closer scrutiny on the deal from the Federal Communications Commission and Department of Justice regulators.
“Corporations and Wall Street applaud this ‘synergy,’ but employees and their families would bear all the costs of this merger,” Shelton added.
Deal under discussion for some time
While this latest step towards achieving a deal between the wireless providers is likely welcomed by many investors, discussions on the T-Mobile, Sprint merger have been ongoing since May.
The creation of special committees is an essential part of the legality of the merger. Without the proper process, minority shareholders of both firms could then raise lawsuits against majority shareholders, if independent procedures aren’t used and adhered to during the deal.
Going forward, confirmation this process is underway will be welcomed, as will some details on the eventual agreement.