Sprint, T-Mobile announce $26.5-billion merger

Sprint, T-Mobile announce $26.5-billion merger

T-Mobile and Sprint are trying again to combine in a deal that would reshape the USA wireless landscape, bringing it down to three major cellphone companies.

The companies dashed a previous plan to merge in 2014 after meeting resistance in Washington. Consumers worry a less crowded telecom field could result in higher prices, while unions are concerned about potential job losses. The German company's chairman, Tim Hoettges, will serve in that role at the combined company while Legere becomes CEO, and the board will include Claure and Son. That said, there's room for debate about consolidation and the degree to one type of combination would be more detrimental to consumers than another.

T-Mobile became the first major US carrier to eliminate two-year contracts, a shift quickly embraced by consumers and copied by competitors.

The two telcos hope together they can bulk up enough to do battle with Verizon and AT&T in the next generation wireless market.

The combined company will be called T-Mobile, and will be headed by John Legere, T-Mobile's current CEO.

Claure will join the combined company's board of directors, but no management job was identified for him in the company's release. Sprint shareholders receiving 0.10256 T-Mobile shares for each Sprint share they own, the equivalent of $6.62 a share based on T-Mobile's closing price of $64.52 of Friday, according to Bloomberg.

Under the deal, T-mobile's majority holder Deutsche Telekom will own 42 percent of the company whereas Sprint's owner SoftBank will have 27 percent of new T-Mobile.

So much about this deal hinges on the near-term demand for 5G, which is still incredibly nebulous.

Investors have been anticipating a deal like this for some time.

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The deal caps several years of starts and stops by the two companies, which last November had abandoned their latest effort to combine.

The deal will have to be reviewed by the Justice Department and the FCC. The deal is yet to get a green signal from the antitrust enforcers, though. There's also the time when AT&T tried to snap up T-Mobile in 2011 and was denied because the government thought it would make the market less competitive.

The news confirms CNBC's earlier reporting hat the two companies would strike an agreement.

Sprint's Claure likened going from 4G to 5G to switching from black-and-white television to color.

Once the merged T-Mobile is finalized, up to $40 billion could be invested in creating a new 5G network in the next three years. He claimed that for Verizon and AT&T to build a nationwide 5G network, they need to either engage in a multi-year process to kick customers off of Long-Term Evolution (LTE) or build on a millimeter wave spectrum at a cost of $1.5 trillion.

T-Mobile has fared better than Sprint, even if it remains a distant third to Verizon and AT&T.

On the other hand, New T-Mobile is moving quickly towards 5G, which will completely transform the way we use and pay for mobile services.

Verizon has 116 million US wireless customers, according to a spokesman, while AT&T has 93 million branded customers, as of the first quarter. That allows a single company to combine home and wireless internet and use content to support the communications businesses.

These are not-so-subtle hints at concerns from Washington that the USA must not only lead in the development of 5G network infrastructure, but perhaps also intervene in the market in order to do so.