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Thread: T-Mobile could get Sprint for a lower price

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    T-Mobile could get Sprint for a lower price

    According to this article, the merger agreement expired on November 1st. So if the deal is approved, T-Mobile could end up paying even less for Sprint.

    https://www.bloomberg.com/news/artic...takeover-price

    And the article reiterates that Sprint is likely headed to financial difficulties if the merger is not approved. Something the AG's and the merger opponents keep denying, but the facts are in the numbers.

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    Quote Originally Posted by jet1000 View Post
    According to this article, the merger agreement expired on November 1st. So if the deal is approved, T-Mobile could end up paying even less for Sprint.

    https://www.bloomberg.com/news/artic...takeover-price

    And the article reiterates that Sprint is likely headed to financial difficulties if the merger is not approved. Something the AG's and the merger opponents keep denying, but the facts are in the numbers.
    Interestingly, as the article points out, this drop in value just puts Sprint's stock right where it was (~$5) right before the merger talks started. It's not like Sprint is suddenly worth less now than they were worth pre-merger. All of the recent (meager) gains in stock price were from the assumption T-Mo would pay more than Sprint was worth.

    "Sprint’s value has eroded as the deal hangs in limbo. The carrier’s market capitalization has fallen to about $20 billion from last July’s peak of $33 billion, putting it back where it was on April 9, 2018, a day before reports that the companies had resumed talks..."

    I'm not sure why this suggests T-Mo would. or should pay any less if the deal is approved, since this really just says a merger-less Sprint is now worth exactly what it was worth the day the merger talks began nearly two years ago- no more, no less.





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    T-Mobile could get Sprint for a lower price

    Quote Originally Posted by jet1000 View Post
    According to this article, the merger agreement expired on November 1st. So if the deal is approved, T-Mobile could end up paying even less for Sprint.

    https://www.bloomberg.com/news/artic...takeover-price

    And the article reiterates that Sprint is likely headed to financial difficulties if the merger is not approved. Something the AG's and the merger opponents keep denying, but the facts are in the numbers.
    All the article really reiterated, was lightshed partners stance that the merger is sprints only option. lightshed partners has been pro merger all along, so their stance on sprints future is not surprising. In my eyes lightshed lost my respect in their opinion when after one day of testimony, they said the AG’s didn’t prove their case and they felt the merger would pass, then proceeded to say that they have no idea what testimony the judge will find important, and what the judge was looking for in their answers. Generally means they have a hidden agenda to get their narrative out.

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    Quote Originally Posted by elecconnec View Post
    I'm not sure why this suggests T-Mo would. or should pay any less if the deal is approved, since this really just says a merger-less Sprint is now worth exactly what it was worth the day the merger talks began nearly two years ago- no more, no less.
    Well, Legere was certainly opened to the possibility of a price change in this quote:

    "Once it’s approved and the deal closes, the terms of the merger could change, he said. If the agreement needs to be amended, “including possibly price, we would handle that very swiftly after the deal was approved,”


    As to why T-Mobile would ask that they pay less is because they know they have Sprint over a barrel. Almost 2 years since the merger was announced and it hasn't helped Sprint's financial position. So while they stock price may be at a similar price, their financial condition as well as their possibility of other options may have diminished. A smart company like Deutsche Telekom would certainly look at the possibility of saving some cash at the expense of Sprint stockholders since the merger agreement did expire.

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    Quote Originally Posted by jet1000 View Post
    Well, Legere was certainly opened to the possibility of a price change in this quote:

    "Once it’s approved and the deal closes, the terms of the merger could change, he said. If the agreement needs to be amended, “including possibly price, we would handle that very swiftly after the deal was approved,”


    As to why T-Mobile would ask that they pay less is because they know they have Sprint over a barrel. Almost 2 years since the merger was announced and it hasn't helped Sprint's financial position. So while they stock price may be at a similar price, their financial condition as well as their possibility of other options may have diminished. A smart company like Deutsche Telekom would certainly look at the possibility of saving some cash at the expense of Sprint stockholders since the merger agreement did expire.

    Perhaps, but that statement also could refer to changing the terms based on whatever conditions the judge might place on the approval.

    Say, for (an admittedly silly) example, that the judge decides all postpaid Sprint customers must be transferred to DISH along with the Boost/Virgin customers, that materially changes the value of T-Mo's acquisition, and the price would have to be adjusted. I don't think Legere came this far just to jeopardize the merger by renegotiating the price at the last minute.

    And I do mean jeopardize, because Sprint is also in a position to play a little hardball too, or at least a game of chicken. If they choose to walk away from a new low-ball offer by T-Mo, T-Mo is in the same position they were (supposedly) in pre-merger: unable to compete with the big two long-term, facing the uncertainty of having to source more spectrum at public auction for who knows what price (vs. the certainty of the "fixed" price of the Sprint purchase), and continuing to have to compete with a low-end 2nd-tier carrier desperate enough for operating income to continue driving "race to the bottom" pricing.

    As to Sprint's financial position, of course it's no better than two years ago- that's an important part of the narrative the two companies have written to push the merger through. If Sprint had managed to strengthen themselves over the last two years, they certainly couldn't have played the "without this merger we're surely doomed" card.

    When Legere had to tell regulators and then the trial judge with a straight face that T-Mo can't possibly compete the big two without this merger, I suspect that a small part of his brain was lamenting how well T-Mo has performed over the last few years...

    ...right before he told shareholders how T-Mo has acquired more postpaid customers than every other carrier for the last six years.





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    Quote Originally Posted by elecconnec View Post
    I don't think Legere came this far just to jeopardize the merger by renegotiating the price at the last minute.
    Now with the Sprint stock having shot up on news of merger approval, I don't know that Legere has a strategy to obtain a new lower price either. He did mention that a price adjustment was possible, but also, he did say the agreement would be completed rapidly after merger approval. He's on the way out and he's not going to make an offer which would cause a delay. But a new agreement apparently must be made as the old one expired on Nov 1 due to the AG's extending this with their lawsuit.

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    Well the merger deal price should be adjusted since Dish is buying the 850 MHz spectrum for $5 Billion that also includes all the Boost and Virgin customers. So either the $26.5 agreement gets dropped by $5B or T-Mobile closes the merger deal first and the New T-Mobile sells off the assets of Dish’s $5 Billion that is sold off to Dish. Either way this is now a $21.5 Billion deal for T-Mobile with the assets sale to Dish for $5 B. Remember the $26.5B deal was signed as a agreement All of Sprint’s assets before the Dish concession. Top that off with Sprint has hemorrhages customers. However don’t think it will change the price more than a Billion dollars over the $26.5 B agreement.

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    Quote Originally Posted by jet1000 View Post
    Now with the Sprint stock having shot up on news of merger approval, I don't know that Legere has a strategy to obtain a new lower price either. He did mention that a price adjustment was possible, but also, he did say the agreement would be completed rapidly after merger approval. He's on the way out and he's not going to make an offer which would cause a delay. But a new agreement apparently must be made as the old one expired on Nov 1 due to the AG's extending this with their lawsuit.
    Yeah, but that stock price increase was the cart leading the horse. T-Mo realistically shouldn't have to pay for the increased value they were bringing to the table. It'd be like if you got Brad Pitt to sign your Once Upon a Time in Hollywood Blu-ray, then tried to sell it to him for $500 because it had his autograph on it!

    My point was that the original "$26 billion" price was based on Sprint's market value before the merger talks became public, and all the intermediate rising and falling of the stock price was based on what chances the market thought the merger had of succeeding, and therefore shouldn't be part of the equation.



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    Quote Originally Posted by elecconnec View Post
    Yeah, but that stock price increase was the cart leading the horse. T-Mo realistically shouldn't have to pay for the increased value they were bringing to the table. It'd be like if you got Brad Pitt to sign your Once Upon a Time in Hollywood Blu-ray, then tried to sell it to him for $500 because it had his autograph on it!

    My point was that the original "$26 billion" price was based on Sprint's market value before the merger talks became public, and all the intermediate rising and falling of the stock price was based on what chances the market thought the merger had of succeeding, and therefore shouldn't be part of the equation.

    In doing some research on this, the merger agreement wasn't based on a stock price but it was based on a ratio of 0.10256 T-Mobile shares for each Sprint share.

    T-Mobile closed at 94.49. That ratio would value a Sprint share at $9.69. However, Sprint only closed at $8.52. So they're saying the market isn't paying the $9.69 because the market expects a negotiation downward. The ratio of the stocks as of today's close is 0.090168. So it would make sense for T-Mobile to try to give out fewer T-Mobile shares to Sprint shareholders based upon that.

    We'll see what the ratio is in the new agreement. This article discusses the likelihood of a negotiation.

    https://www.barrons.com/articles/spr...ed-51581378766

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    Quote Originally Posted by jet1000 View Post
    In doing some research on this, the merger agreement wasn't based on a stock price but it was based on a ratio of 0.10256 T-Mobile shares for each Sprint share.

    T-Mobile closed at 94.49. That ratio would value a Sprint share at $9.69. However, Sprint only closed at $8.52. So they're saying the market isn't paying the $9.69 because the market expects a negotiation downward. The ratio of the stocks as of today's close is 0.090168. So it would make sense for T-Mobile to try to give out fewer T-Mobile shares to Sprint shareholders based upon that.

    We'll see what the ratio is in the new agreement. This article discusses the likelihood of a negotiation.

    https://www.barrons.com/articles/spr...ed-51581378766
    Interesting. In any case, I no longer have a dog in this fight. I sold my entire vast 100-share interest in Sprint at market open this morning for $8.30/share.

    I decided after Sprint stock shot up on the merger rumor last night to dump my stock just in case the rumor was only a rumor and the bottom dropped out of the stock again.



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    Quote Originally Posted by elecconnec View Post
    Interesting. In any case, I no longer have a dog in this fight. I sold my entire vast 100-share interest in Sprint at market open this morning for $8.30/share.
    Congratulations on your windfall!

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    Quote Originally Posted by jet1000 View Post
    Congratulations on your windfall!
    More of a bail out than a windfall. I think I paid just over $9/share for it back in the day. A bazillion years ago when I was in the cellular biz (I owned an independent Cingular Wireless dealership in Kansas City in the late 90s), I bought a 100 shares of each major wireless company to stay current with their annual reports and shareholder communications (back before all of that stuff was easily obtainable by anyone online.)

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    Well T-Mobile did indeed get Sprint and Son to take a smaller percentage of the new company. Sprint will own 3% less of the new company than previously agreed.

    https://www.t-mobile.com/news/t-mobi...tion-agreement



    It is interesting that they left the ratio the same for the Sprint shareholders so they didn't lose out so their percentage will actually go up from 31 to 33%. Sprint took the whole hit themselves.

    It is great that they have a new agreement and can move forward.

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