Despite the fact that T-Mobile US and Sprint reportedly won’t be announcing whether or not a merger deal will take place between them, the two carriers have a major backer on their side in the form of billionaire hedge fund manager John Paulson.
Paulson owns a significant amount of shares in each of these carriers, so it’s no surprise that he is willing to back the deal, even though it looks set to face obstacles with regards to receiving approval from industry regulators. The Wall Street Journal recently made mention of the fact that Paulson is the fourth largest shareholder in T-Mobile US and the third-largest shareholder in Sprint. His combined investment in the carriers is worth just over $1 billion.
Deutsche Telekom owns 67% of T-Mobile, while SoftBank controls approximately 80% of Sprint. Bloomberg recently reported that, although T-Mobile and Sprint have come to an agreement regarding the terms associated with a potential merger, the actual transaction would most likely only be announced sometime during August. It was reported by unnamed sources that Sprint would be offering in the region of $40 per share in stock and cash for T-Mobile, meaning that the deal would be worth around $32 billion.
While regulators at the Department of Justice and the FCC have both expressed concern over the removal of a national cellular carrier form the market, Paulson feels that a merger deal between the two carriers would have many benefits. He stated the following in an interview with the Journal, “Clearly competition will increase if you allow them to merge. It will improve service and lower prices. I think regulators will be open-minded.”
He went on to note that European Union regulators recently allowed similar mobile consolidation deals to go ahead in Ireland and Germany, even though both deals came with terms and conditions which are intended to keep competition levels as strong as possible in the respective markets.
With regards to the possibility of a merger taking place between T-Mobile and Sprint, Paulson went on to state that it would be highly unlikely that he would be raising any complaints regarding the terms associated with the deal. He also noted that if Sprint was willing to offer pricing in the region of between the high $30s to low $40s for each share, he would consider the offer as being a reasonable one. His words in this regard were, “The big value isn’t the premium, the big value is the synergies from the deal.”
According to information recently published in the Journal, Morgan Stanley estimated that, should the merger deal go ahead, the annual cost savings for the network providers would be at least $3 billion.