Over the weekend the third and fourth largest telecom companies in the United States announced that they have agreed to terms for a merger. Instead of boosting the two companies, news about the deal saw both stocks plummet.
The merger is worth $26.5 billion dollars, and CEOs John Legere (T-Mobile) and Marcelo Claure (Sprint) have both promised major advancements for the future, but investors are not convinced. According to analysts, the three main issues with the telecom merger is the massive price tag that is higher than anyone would have expected, the regulatory viability, and the predicted $43 billion in synergies which is also higher than other predictions
If management predictions turn out to be correct, it would be huge for T-Mobile and it would really give them room to compete in the space. A combination of the two companies services and experience from the field would create a unique company. However, right now it’s causing more harm than good.
On Monday, one day after the M&A was announced, the Sprint stock fell by over 14 percent, trading just under $6 per stock and T-Mobile fell by over 4 percent, trading just under $60.
The Future of T-Mobile
Another issue with the Sprint and T-Mobile merger is that many think it will result in higher cell phone plans due to less competition which could spark an outcry across the nation. Also, the White House is probably not happy about the development considering that Trump has a reputation for meddling in these kinds of deals. Case in point, most recently Trump scrutinized the proposed deal where AT&T planned to buy Time Warner.