T-Mobile, Sprint merger given 50-50 shot at winning government approval

The marriage of T-Mobile and Sprint faces an uncertain path through the Trump administration as investors and analysts expect intense regulatory scrutiny of the $26 billion deal.

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Shares of T-Mobile and Sprint tumbled Monday on concern the Department of Justice and Federal Communications Commission will block the merger. In 2014, the Obama administration scuttled the companies’ attempt to make a deal over concern that the U.S. market would be limited to three major mobile carriers. T-Mobile and Sprint – the third- and fourth-largest U.S. carriers, respectively – are trying to complete a merger for the third time in four years.

Analysts at CFRA said that while T-Mobile and Sprint would benefit from combining forces, they face an uphill battle when it comes to obtaining the government’s approval.

“We envision, at best, a 50% chance of regulatory approval given recent industry challenges with vertical deals as it will be difficult to prove fewer carriers will be good for consumers,” CFRA’s Angelo Zino wrote in a note to clients.

Macquarie analyst Amy Yong said foreign ownership of Sprint and T-Mobile may complicate matters. SoftBank, the Japanese parent company of Sprint, will own 27.4% of the new company. Deutsche Telekom, which holds a majority stake in T-Mobile, will own a 41.7% stake.

T-Mobile CEO John Legere cited competition from seven or eight “big competitors in this converging market.” He added that a combined T-Mobile and Sprint would be the first mobile carrier to offer a nationwide 5G wireless network.

Legere told FOX Business’ Liz Claman that FCC Chairman Ajit Pai promised to “keep an open mind.”

The T-Mobile-Sprint deal surfaced as AT&T defended its acquisition of Time Warner. The DOJ sued to intervene, arguing that the $85 billion deal would harm consumers. A federal judge’s decision on the AT&T case, which is expected to come June 12, may provide clarity on the prospects of the T-Mobile-Sprint deal.

TickerSecurityLastChangeChange %
TMUST-MOBILE US113.59-2.48-2.14%
SSPRINT CORP.8.62+0.18+2.13%

FOX Business’ Charlie Gasparino reported that DOJ officials view the merger, which would create the second-largest U.S. wireless carrier, as better for consumers than the AT&T-Time Warner deal.

The combined entity would be called T-Mobile, and the companies expect the deal to close by the end of the first half of 2019. Under terms of the agreement, there are no break-up fees if regulators derail the merger.