The big four mobile companies could be about to become the big three. Sprint and T-Mobile have agreed on an outline of a merger that puts T-Mobile’s value north of $30 billion.
According to the broad terms, Sprint will pay about $40 a share for T-Mobile in a massive acquisition that could happen as soon as this summer.
Negotiations are still going on between Sprint and T-Mobile. If finalized, the combined company would be better suited to compete with Verizon and AT&T.
There are some hurdles for Sprint and T-Mobile to overcome even if it finalizes a deal. Any deal would require approval from the FCC and Justice Department. This hurdle does not seem insurmountable for Sprint. In fact, Sprint are so confident the deal will get approval that they will pay T-Mobile more than $1 billion in cash and other assets if the deal is rejected according to the WSJ.
Why is Sprint so confident it will pass the regulatory hurdles? Sprint execs believe recent debates over net neutrality and spectrum-auction rules, which work against smaller carriers such as T-Mobile and Sprint, have created an opportunity for the two companies if they act quickly.
Recent history isn’t in Sprint’s corner though. Regulators approved deal after deal at the turn of the century, but stepped on AT&T’s $39 billion bid for T-Mobile in 2011. Regulators said the U.S. needed four carriers at the time to foster competition.
Anti-trust officials will have their work cut out for them this summer. Besides today’s news of a $32 billion deal between Sprint and T-Mobile, officials will also be weighing Comcast’s $45 billion bid for Time Warner Cable and AT&T’s $49 billion bid for DirecTV.