T-Mobile US and Sprint Corporation today announced they have entered into a definitive agreement to merge.
The combined company will be named T-Mobile, and pursue a deep change in the U.S. wireless, video, and broadband industries.
The Boards of Directors of T-Mobile and Sprint have approved the transaction.
Deutsche Telekom and SoftBank Group are expected to hold approximately 42% and 27% of diluted economic ownership of the combined company, respectively, with the remaining approximately 31% held by the public.
The Board will consist of 14 directors, 9 nominated by Deutsche Telekom and 4 nominated by SoftBank Group, including Masayoshi Son, Chairman and CEO of SoftBank Group, and Marcelo Claure, CEO of Sprint. John Legere, CEO of the New T-Mobile, will also serve as a Director. Upon consummation of the transaction, the combined company is expected to trade under the (TMUS) symbol on the NASDAQ.
The transaction is still subject to customary closing conditions, including regulatory approvals. The transaction is expected to be completed no later than the first half of 2019.
The new company will own some of the most iconic brands in wireless (T-Mobile, Sprint, MetroPCS, Boost Mobile, Virgin Mobile) and will determine brand strategy after the transaction closes.
The merger, says T-Mobile, is fuelling competition, better prices for clients and job creation, as well as pushing the US to the forefront of 5G segment with at least the resulting job creation and economic growth for the USA that once brought the 4G push.
T-Mobile merged with MetroPCS to compete in the 4G era, a transaction that has resulted in substantial job growth. Three times the number of people work on MetroPCS today compared to the time of the acquisition in 2013.
With that track record, the New T-Mobile promises to accelerate long term economic stimulus for the U.S. in the 5G era, leading to creating thousands of American jobs and supporting business opportunities for the U.S. economy.
5G is expected to generate 3 million new U.S. jobs and $500Bn in economic growth by 2024, according to a report from CTIA, and the combined company, assures T-Mobile, will be a catalyst in driving that massive economic stimulus.
All but AT&T, Verizon, Comcast and other competitors will benefit from the merger
The combination of spectrum holdings, resulting network scale, and expected run rate cost synergies of over $6Bn representing a net present value of over $43Bn are expected to supercharge T-Mobile’s Un-carrier strategy to disrupt the marketplace and lay the foundation for U.S. companies and innovators to lead in the 5G segment.
T-Mobile points that early U.S. leadership in 4G fueled a wave of American innovation and entrepreneurship that gave rise to today’s global mobile Internet leaders, creating billions in economic value and job growth. America’s early 4G leadership is credited with creating 1.5 million jobs and adding billions to the U.S. GDP. With 5G, the stakes are even higher – because 5G will be even more transformational.
Ubiquitous high-speed 5G service and Internet of Things (“IoT”) capabilities will ignite innovation across industries and create the conditions for U.S. firms and innovators to lead the globe in the 5G era.
“Going from 4G to 5G is like going from black and white to color TV,” added Claure. “It’s a seismic shift – one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.
T-Mobile also underscores that no company standing alone can create a nationwide 5G network with the breadth and depth required to fuel the next wave of mobile Internet innovation in the U.S. and answer competitive challenges from abroad.
From the first day Sprint and T-Mobile combine and every year thereafter, the new company will employ more people in the U.S. than both companies would separately: more than 200,000 people will work on behalf of the combined company in the U.S. at the start.
the New T-Mobile plans to invest up to $40Bn in its new network and business in the first three years alone, a 46% more than T-Mobile and Sprint spent combined in the past three years. And this investment, says the company, will fuel job growth at the new company and across related sectors.
The combination of T-Mibile and Sprint will also force AT&T Charter, Comcast, Verizon, and others to make investments of their own to compete, driving billions more in accelerated investment,says T-Mobile.
Two headquarters with Legere as President
The new company will be headquartered in Bellevue, Wash., with a second headquarters in Overland Park, Kan. John Legere, current President and Chief Executive Officer of T-Mobile US and the creator of T-Mobile’s successful Un-carrier strategy, will serve as Chief Executive Officer, and Mike Sievert, current Chief Operating Officer of T-Mobile, will serve as President and Chief Operating Officer of the combined company.
The remaining members of the new management team will be selected from both companies during the closing period. Tim Höttges, current T-Mobile US Chairman of the Board, will serve as Chairman of the Board for the new company. Masayoshi Son, current SoftBank Group Chairman and CEO, and Marcelo Claure, current Chief Executive Officer of Sprint, will serve on the board of the new company.
“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” said John Legere. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”
“The combination of these two dynamic companies can only benefit the U.S. consumer. Both Sprint and T-Mobile have similar DNA and have eliminated confusing rate plans, converging into one rate plan: Unlimited,” said Marcelo Claure. “We intend to bring this same competitive disruption as we look to build the world’s best 5G network that will make the U.S. a hotbed for innovation and will redefine the way consumers live and work across the U.S., including in rural America. As we do this, we will force our competitors to follow suit, as they always do, which will benefit the entire country. I am confident this combination will spur job creation and ensure opportunities for Sprint employees as part of a larger, stronger combined organization, and I am thrilled that Kansas City will be a second headquarters for the merged company.”
5G for All will unleash incredible benefits and capabilities for consumers and businesses. Imagine, for example, augmented reality heads-up displays that see everything you do, and provide real-time cloud-driven information about the people and objects around you. Imagine never losing anything again because low-cost sensors with decade long battery life are embedded in everything you own. Imagine an earpiece providing real-time translation as a friend speaks to you in another language. Imagine environmental sensors in infrastructure and for agriculture having a profound impact on productivity.
The combined company will have the network capacity required to quickly create a broad and deep 5G nationwide network in the critical first years of the 5G innovation cycle (the years that will determine if American firms lead or follow in the 5G digital economy).
With Sprint’s expansive 2.5 GHz spectrum, T-Mobile’s nationwide 600 MHz spectrum, and other combined assets, the New T-Mobile plans to create the highest capacity mobile network in U.S. history.
Compared to T-Mobile’s network today, the combined company’s network is expected to deliver 15x faster speeds on average nationwide by 2024, with many customers experiencing up to 100x faster speeds than early 4G.
Why competitors can’t do it
AT&T and Verizon in the near term, even though they will still respectively own 34% and 172% more spectrum than the combined company. Even with their vast resources, AT&T and Verizon cannot rapidly build nationwide 5G and their planned 5G networks will only be available sporadically in just a handful of very limited areas. To build nationwide 5G, they either have to kick current customers off LTE, which would take years, or use a type of spectrum (millimeter wave) that can only carry a signal 2,000 feet from a cell site – versus multiple miles for other spectrum – making it nearly impossible for either of them to create a truly nationwide 5G network quickly.
More choice and competition, that benefits consumers, business and Government
The new company will bring more choice and competition for all consumers, including three key underserved areas:
a) Rural communities.- Rural Americans seldom have a choice of more than one or two wireless, broadband, or cable providers. The New T-Mobile will end that with increased reach and plans to open hundreds of new stores in rural communities, creating thousands of new jobs. Millions of Americans in rural communities will have more choice and competition, where they may have none today.
b) Broadband.- 51% of Americans have only one high-speed broadband option – no choice at all! The combined company will create a viable alternative for millions by enabling mobile connections that rival broadband, driving prices lower and improving service.
c) Business and government wireless services.- Today, Verizon and AT&T dominate this category with 4x more customers than Sprint and T-Mobile added together. With its assets and capabilities, the new company will unlock real competition for business and government customers.
“This isn’t a case of going from 4 to 3 wireless companies – there are now at least 7 or 8 big competitors in this converging market. And in 5G, we’ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G,” added Legere. “We’re confident that, once regulators see the compelling benefits, they’ll agree this is the right move at the right time for consumers and the country.”
T-Mobile explains that wireless, broadband, and video markets are rapidly converging. AT&T is now the largest TV provider in the country. Comcast added more wireless phone customers last year than AT&T and Verizon combined, and Charter is launching wireless this year. And, more than 1 in 10 Americans (12%) use wireless as their only Internet or broadband connection, freeing themselves from the grip of the traditional, uncompetitive in-home broadband providers.
Economic terms of the merger operation
The merger will be carried out in an all-stock transaction at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share or the equivalent of 9.75 Sprint shares for each T-Mobile US share.
Based on closing share prices on April 27th, this represents a total implied enterprise value of approximately $59Bn for Sprint and approximately $146Bn for the combined company. The new company will have a strong closing balance sheet and a fully funded business plan with a strong foundation of secured investment grade debt at close.
Image over the headline.- T-Mobile CEO John Legere, left, and Sprint CEO Marcelo Claure take questions from Twitter on Sunday April 29, 2018, in New York during a call announcing that the companies will combine creating a fierce competitor in wireless, video, and broadband able to deliver lower prices and greater competition. Photo by Charles Sykes/AP Images for T-Mobile and Sprint.
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