Sprint Corporation (S) and T-Mobile US Inc (TMUS) Set for 32$ Billion deal


Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) have finally have zeroed down all the terms and conditions for the merger and this would put T-Mobile’s value at around $40 per share. Kevin Smithen, an analyst from Macquarie Securities was at the CNBC Squawk Box earlier today and he was analyzing what the deal might mean to the Telecom industry.

Aprint, T-Mobile

Smithen stated about the possibilities for Sprint from the deal:

“Sprint can open up its network to mvno partners. You know Amazon is launching a new phone as you’ve reported. We think they could be potentially interested in MVNO to subsidize bandwidth and access cost for their Prime customers. Sprint and T-Mobile would be a logical partner.”

This was one of the three possibilities Smithen discussed. He also felt that Sprint Corporation (NYSE:S)  would try to compete with its rival AT&T Inc. (NYSE:T) in the rural broadband sector where the speeds are low and there is no Fiber. AT&T is able to offer a home broadband solution using wireless spectrum. So Sprint might also try a hand in this sector and compete with AT&T. Both the companies would look to get required regulatory approvals for this.

Regarding both Sprint Corporation (NYSE:S) and AT&T Inc. (NYSE:T) leading this solution, Smithen said:

“Obviously you know they can divest in spectrum to the competitors to try to create a more level playing field because spectrum is a scarce resource. “

All the companies need spectrum so if Sprint gains regulatory approvals, it along with AT&T can provide the infrastructure.

Smithen stated that his company has downgraded T-Mobile US Inc (NYSE:TMUS) this week as at a current price of around $ 35, $ 40 doesn’t look a very attractive price and hence the stock is expected to trade flattish today due to the announcement of $ 40 a share.

While Smithen spoke about the possibilities that the deal might open up for Sprint, the legendary venture capitalist Marc Andreessen was of the opinion that the telecom consolidations needs balance and he was of the opinion that it should be overdone all at a time.

Andreessen was not specific to this deal and he was in general giving his opinion on the recent telecom deals, be it Comcast – TWC deal, AT&T Direct TV deal or the latest Sprint – T-Mobile deal. Andreessen said:

“Generally, whatever leads to increased, I think, investment is good and I think whatever leads to increased competition is good. But I think you need to reconcile the investment competition because with too much competition and too many parallel pipes you won’t get massive investment. So I think we need a balance in between the two.”

Andreessen feels that there should be five broadband connections in every American home as it increases the competition and encourages the companies in invest aggressively. This deal of Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) seems to be a move towards that. However the price per share offered for T- Mobile might not excite the investors very much.

John Paulson’s Paulson & Co has the largest number of shares in T-Mobile US Inc (NYSE:TMUS), owning 16.1 Million shares as of the end of March. Other large investors in the company are Third Point and Larry Robbins’ Glenview Capital. This deal would surely impact these companies too.

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