T-Mobile and Sprint agreed on Sunday to merge in an all-stock transaction, valuing a combined company at $146 billion. However, uncharacteristic of mergers, stocks have dropped and ETFs are down.
With T-Mobile and Sprint finally agreeing to a merger, it marks the end of countless hours of negotiation over who would hold the largest stake in the company.
The merger will still need to be approved by U.S. regulators.
According to Fox Business, “Deutsche Telekom, which owns a majority stake in T-Mobile, will control 42% of the new company. SoftBank Group, which is the majority shareholder in Sprint, will control 27% of the company. The remaining 31% will be held by the public. Based on Friday’s closing stock prices, T-Mobile has a market value of $55 billion, while Sprint’s market value is $26 billion.”
Unfortunately, it could’ve been a much better deal for Sprint’s parent company, SoftBank, if only the Japanese telecom giant had acted sooner.
According to Business Insider, “If a deal with the same terms had been approved in October, Sprint shareholders would’ve held 30% of the new entity, compared with just 27% outlined in the new agreement. When applied to the $146 billion value of the combined company, that’s a difference of $4.4 billion. On a percentage basis, it comes out to a 10% difference when you consider that since talks ended last year, Sprint has fallen 7%, and T-Mobile has climbed 3%.”
Related: Time to Dial up Telecom ETFs?
Let’s take a look at how ETFs with join exposure to Sprint and T-Mobile are being affected as of 1 p.m. Eastern time.
3 ETF with joint exposure to Sprint and T-Mobile React to Merger
- iShares US Telecommunications ETF (IYZ) with a 4.85 weighting of Sprint and a 6.25% weighting of T-Mobile is down 1.47%.
- US Vanguard Telecommunication Services ETF (VOX) with a 2.87 weighting of Spring and a 4.13% weighting of T-Mobile is down 2.52%.
- US Fidelity MSCI Telecommunication Services Index ETF (FCOM) with a 2. 28% weighting of Sprint and a 4.08 weighting of T-Mobile is down 2.55%.
Approval from Anti-Trust Regulators
The two will also have to get approval from antitrust regulators which could be hard after the Trump administration came down critically of the mega-acquisition of Time Warner by AT&T.
To make matters worse, since the merge was announced, Sprint stock plummeted more than 10% in premarket trading on Monday.
By combining, T-Mobile will become the nation’s third-largest mobile carrier service, following Verizon Wireless and AT&T, which rank first and second, respectively.
For latest current affairs articles, visit our current affairs category.