Judge Poised To Approve USD 59 Billion Sprint Takeover

A federal judge is set to approve T-Mobile USA’s $59bn takeover of its rival Sprint, paving the way for further consolidation in the American telecommunications market, according to people briefed on the ruling.

News of the ruling, which is due to be handed down on Tuesday morning, sent shares in Sprint surging almost 70 percent in after-hours trading on Monday, although the legal victory could yet be followed by a renegotiation of the financial terms of the deal.

Legal representatives for the two companies and states who sought to block the merger were told on Monday about the broad direction of the judge’s ruling, three people said, but full details — such as any conditions on the approval — were unclear.

A clerk for the judge overseeing the case, Victor Marrero, told the parties on a call on Monday afternoon the decision would come around 8am on Tuesday and said it would be a “judgment for the defendants”, one of the people said.

The ruling is a notable victory for John Legere, T-Mobile’s flamboyant chief executive, on the eve of his departure after eight years running the company. He argued combining the third and fourth-largest mobile carriers in the US would create a more formidable competitor to take on Verizon Wireless and AT&T in the development of next-generation 5G technology.

The acquisition of Sprint attracted scrutiny after it was announced in April 2018, although the deal was ultimately backed by Trump administration officials at the Department of Justice and Federal Communications Commission on condition of some divestitures to Dish, the satellite television provider.

A group of Democratic states led by New York and California opposed the merger in court, however, saying the elimination of Sprint, the number four player in the wireless market, would result in higher prices and lower service quality for consumers. It is unclear if the states will attempt to appeal against the decision.

The unusual disclosure of Judge Marrero’s ruling was first reported by The Wall Street Journal. The judge’s chambers did not immediately return an email seeking comment late on Monday.

Shares in Sprint rallied as much as 70 percent in after-market trading to more than $8 each. They had fallen sharply since last summer, reaching a low of $4.28 earlier this month on fears the deal would be blocked by Judge Marrero.

The offices of the California and New York state attorneys-general, who led the attempt to block the deal, did not immediately return requests for comment, nor did representatives for Sprint and T-Mobile.

A renegotiation is expected to follow the judge’s approval, one person familiar with the deal talks said on Monday. When the all-stock deal was struck in 2018, it valued Sprint shares at roughly $6.62 each, but the fortunes of the two companies have diverged drastically since then. Sprint has struggled, and last year its legal advisers warned US regulators that without a deal with T-Mobile it would have limited options.

T-Mobile shares, meanwhile, have outpaced the broader market. That has prompted the company’s executives to push to renegotiate the deal with their counterparts at Sprint and SoftBank, the Japanese conglomerate which is Sprint’s controlling shareholder. If the current deal was left in place, it would value Sprint at $8.67 a share.

Beyond T-Mobile and Sprint, the expected approval will be a win for Makan Delrahim, the antitrust chief at the justice department who has argued forcefully against the states’ lawsuit. A spokesman for Mr Delrahim did not immediately return a request for comment.

Last week Mr Delrahim warned that allowing the states to prevail after the federal government had agreed a settlement would “wreak havoc on parties’ ability to merge”.

At trial, it emerged the Trump appointee had taken dramatic steps to ensure the merger’s success, at one point urging Charlie Ergen, chairman of Dish, by text to use his contacts in the Senate to persuade Ajit Pai, the FCC chairman, to back the deal.

The settlement agreed by Mr Delrahim, currently under a public interest review by a separate court in Washington DC, also required T-Mobile to provide network access to Dish for seven years and to make available cell sites and retail locations.

In addition to the public interest review, the deal also requires approval by the California Public Utilities Commission.

Mr Delrahim’s support for the transaction with divestitures contrasted with the Obama administration’s hostility to further consolidation in the telecoms market.

In 2011 the justice department successfully blocked AT&T’s attempted buyout of T-Mobile. Previous T-Mobile and Sprint merger discussions had been scotched by US competition authorities worried about the mobile phone market shrinking from four to three players.―Financial Times