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Sprint, T-Mobile Agree to Merger That’s Poised to Change the U.S. Telecom Landscape

After years of negotiations, it’s finally official: Mobile carriers Sprint and T-Mobile have agreed to join forces in a mega-merger, the two companies announced Sunday. The all-stock transaction, which puts the value of the combined company at $146 billion, is poised to significantly change the U.S. telecom and media landscape.

The combined company will be known as T-Mobile and led by T-Mobile CEO John Legere. T-Mobile’s current COO Mike Sievert will serve as president and COO of the combined company. Sprint CEO Marcello Claure will serve on the board of the new company, but not have any active management role. Joining him on the board will be Softbank CEO Masayoshi Son. T-Mobile is also keeping the combined company on its books.

T-Mobile majority owner Deutsche Telekom will hold a 42% stake in the new company, whereas Sprint majority owner SoftBank will hold 27%, with the rest held by public shareholders. If approved, the transaction is expected to close by early 2019.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could on its own,” said Legere in a statement.

Legere broke the news on Twitter Sunday morning with a video that featured him as well as Claure. In the video, the duo made the case that the merger was essential to advance 5G, a next-generation wireless networking technology that promises not only faster speeds for mobile devices, but that could ultimately replace fixed-line internet access.

The merger could significantly change the power dynamic in the U.S. mobile market: T-Mobile and Sprint have been the No. 3 and 4 in the U.S. mobile market, respectively. Combined, the two companies will have more than 125 million subscribers. AT&T ended 2017 with more than 141 million wireless subscribers in the U.S., whereas Verizon led the pack with 150 million subscribers.

While remaining a distant third, T-Mobile has long enjoyed an outsized role in the U.S. mobile market. For instance, the company was first to introduce unlimited data plans, forcing other carriers to follow suit. Legere’s combative personality also allowed the company to style itself as an underdog taking on incumbent carriers.

But what truly sets T-Mobile apart from AT&T and Verizon are their different takes on the media business. Both AT&T and Verizon operate their own TV services, and have long invested aggressively into online media businesses. T-Mobile and Sprint on the other hand have traditionally been focused on their core businesses.

Verizon acquired AOL in 2015, and doubled down on online media with the acquisition of Yahoo last year. The company has also been looking to make inroads with mobile-first media audiences with its Go90 video service, and plans to launch an internet-based TV service sometime this year.

AT&T is already operating an internet TV service with DirecTV Now and has also been investing into online video businesses through Otter Media, a joint-venture with the Chernin Group. The company also struck an agreement to acquire Time Warner last year, and is currently defending the merger in court.

Compared to these massive deals, T-Mobile’s and Sprint’s media buying sprees have been relatively small thus far. T-Mobile acquired broadband-delivered cable TV upstart Layer3 TV in December, and at the time announced plans to launch a nationwide internet TV service in 2018. And Sprint acquired a 33% stake in Jay Z’s music streaming service Tidal a little over a year ago.

This could potentially help both companies with regulators, who are expected to take a very close look at the proposed merger. Both the FCC and the Justice Department opposed a merger between the two companies four years ago, arguing that it would reduce competition and harm consumers. However, both agencies are under new leadership, and President Trump is generally seen as less opposed to big corporate mergers.

On Sunday, Legere and Claure made the case that their industry had significantly changed over the past couple of years. “In reality, this industry is no longer just four wireless companies,” Claure said. Instead, AT&T had become the biggest TV provider in the U.S., and cable operators like Comcast were increasingly launching their own wireless services. “It’s not the big four anymore. It’s the big seven or eight,” he said.

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