CNBC is reporting that Sprint and T-Mobile have agreed to a $2 billion breakup fee should their potential merger not go through. The Wall Street Journal had previously reported the breakup fee attached to the merger would be $1 billion.
The two companies have also reportedly agreed on T-Mobile as the name for the combined company, lending credibility to reports that T-Mobile CEO John Legere is in line to lead after the merger.
T-Mobile has been outpacing Sprint, Verizon and AT&T in adding subscribers over the past few quarters and the number four carrier has been steadily improving its network and spectrum portfolio. Part of T-Mobile’s advances can be attributed to the $4 billion breakup fee it cashed in when U.S. regulators in 2011 shot down AT&T’s $39 billion bid for the carrier.
The FCC, now under the leadership of Chairman Tom Wheeler, has been similarly skeptical of a proposed tie-up between Sprint and T-Mobile.
SoftBank CEO/Sprint Chairman Masayoshi Son has been busy bashing the state of the U.S. wireless industry as his company is reportedly readying a bid for T-Mobile as soon as July. Reports have indicated Sprint and Deutsche Telekom (DT), owners of 67 percent of T-Mobile, have agreed to a $40 per share price tag. DT would retain a 15 percent stake in T-Mobile following the transaction.
Lurking in the shadows is Dish Network, which last year proved a serious impediment to Sprint’s eventual acquisition of Clearwire and SoftBank’s eventual acquisition of 80 percent of Sprint.
In light of AT&T’s proposed $49 billion acquisition of satellite TV giant DirecTV, analysts have speculated Dish could jump in with a bid for T-Mobile. The move would help Dish keep pace with DirecTV and also provide it with a network on which to deploy its spectrum.
But Macquarie Capital analyst Kevin Smithen said Dish partnering with a combined Sprint and T-Mobile is more likely. Access to the combined company’s infrastructure would help Dish realize its wireless provider ambitions and possibly turn it into a replacement fourth U.S. carrier, which could ease the concerns of regulators of letting Sprint and T-Mobile merge. That scenario could also potentially provide a combined Sprint and T-Mobile with a TV play in order to better compete with AT&T and Verizon, both well established in TV.
