iNVEZZ.com, Saturday, December 14: T-Mobile US (NYSE:TMUS), the US’s fourth largest mobile carrier, has seen its biggest one-day gain in share price in more than a year after a report by the Wall Street Journal said that rival Sprint Corp (NYSE:S) is considering a bid.
In yesterday’s trading, T-Mobile shares closed 8.6 percent higher at $27.64. The Sprint share price also saw significant gains, rising 3.44 percent to $8.43.
Sprint, the third largest US mobile carrier, is working on a takeover bid for smaller rival T-Mobile, the WSJ reported yesterday, citing unnamed sources familiar with the matter. A potential mega-merger between the two companies would change the landscape of the US mobile market, creating a sizable competitor to industry leaders Verizon Wireless and AT&T Inc (NYSE:T). It would also mean that there would be three major mobile-phone services in the US, instead of four, which could raise antitrust concerns.
Opposition from US regulators was the reason AT&T abandoned its own plans to acquire T-Mobile in 2011.
“There is little chance for a Sprint/T-Mobile deal to get through regulators over the next two years,” observed Walt Piecyk, an analyst at BTIG LLC in New York, as quoted by Bloomberg.
Sprint is studying regulatory concerns and could push ahead with a bid for T-Mobile in the first half of next year, according to the sources. The deal could be worth more than $20 billion, depending on the size of the stake Sprint tries to buy.
The Kansas-based company hasn’t decided whether to move ahead with a bid, the Journal said.
A potential combination between Sprint and T-Mobile will result in a company much more capable of challenging Verizon and AT&T. The idea has been suggested by analysts and investors, as a way for both companies to address their profit struggles. Together, Sprint and T-Mobile would have nearly 53 million ‘postpaid’ subscribers—the industry’s most creditworthy and lucrative customers. This figure compares with 95 million postpaid subscribers for Verizon and 72 million for AT&T. While still well behind the top dogs, the combined company would have a better chance of challenging the leaders.
Executives from the two companies have publicly argued that the government should allow a merger, as it would provide them with the necessary scale to make network investments and spectrum purchases needed to compete against Verizon and AT&T.
A deal would also extend a recent wave of consolidation in the US telecommunications business. Earlier this year, Sprint was acquired by Japanese mobile carrier SoftBank Corp (TYO:9984), while T-Mobile merged with smaller rival smaller rival MetroPCS. Meanwhile, Deutsche Telekom AG (ETR:DTE), the German telecoms giant which controls T-Mobile, is reportedly looking to exit the US market.
**As of yesterday’s US close buy T-Mobile shares at $27.64**
**As of yesterday’s US close sell T-Mobile shares at $27.55**
**As of yesterday’s US close buy Sprint shares at $8.70**
**As of yesterday’s US close sell Sprint shares at $8.65.**
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