The scuttlebutt on Wall Street Tuesday morning concerns the idea that T-Mobile (NASDAQ: TMUS) and Sprint (NYSE: S) are in active talks about a merger.
Both companies and their parents, Deutsche Telekom and Softbank, have been in frequent conversations about a stock-for-stock merger in which T-Mobile parent Deutsche Telekom would emerge as the majority owner.
Sources stress that negotiators are still weeks away from finalizing a deal and believe the chances of reaching an agreement are not assured. The two sides have not yet set an exchange ratio for a deal, but are currently engaged in talks to hammer out a term sheet.
T-Mobile and Sprint have reportedly been flirting over the years since Softbank took control of Sprint, pushed by the prospect of billions of dollars in cost synergies that a merger would bring. The last time the two companies held meaningful talks earlier this year, Softbank's Masayoshi Son indicated a willingness to sell Sprint to T-Mobile.
One note of caution: T-Mobile has not begun due diligence on Sprint, yet another step that could change current price expectations or the willingness to move forward.
The biggest issue is whether any merger between the numbers-three and four wireless carriers in the nation would be approved by U.S. anti-trust regulators. The risk of rejection by the Department of Justice would play an important role in the final decision made by both sides as to whether they will proceed with a deal.
T-Mobile shares climbed $2.47, or 4%, Tuesday morning to $64.27, while Sprint’s shares did just that, running 47 cents faster, or 6.1%, to $8.15.
