Sprint-T-Mobile $32 bn deal to ensure partial exit of Deutsche Telekom from U.S

American telecom carrier Sprint is reportedly set to acquire rival T-Mobile US for a consideration of $32 billion, ensuring partial exit of Deutsche Telekom from the U.S.

Sprint has the financial backing of its majority owner SoftBank of Japan.

According to Bloomberg reports, the size of the much discussed telecom deal will be $40 per share, a 17 percent premium on Wednesday’s price at the close of trading. The combined T-Mobile-Sprint entity will be in a position to take on Verizon and AT&T, two top telecom operators in the U.S.

Last week Reuters reported that SoftBank, the Japanese owner or Sprint, has agreed on the price of the deal. However, the deal is subject to regulatory approvals. If the combined Sprint-T-Mobile entity is set to become a dominant wireless force, getting regulatory nod will become a tough job.

Partial exit of Deutsche Telekom

This deal indicates the partial exit of Deutsche Telekom, a global telecom operator, from the American wireless market. Deutsche Telekom will own 15 percent in the merged entity. Currently, Deutsche Telekom has 67 percent equity stake.

Earlier, Vodafone, the global telecom major, exited from the American wireless market by selling its stake in Verizon Wireless. Recently, Vodafone decided to shift its innovation hub to London from Silicon Valley to utilize emerging engineering talent in the U.K. market.

Under the terms of the deal, T-Mobile majority owner Deutsche Telekom will trade its 67 percent stake for 15 percent of the merged business. The deal will also include a $1 billion breakup fee that Sprint will pay T-Mobile should the deal not go through.

Bloomberg said the $32 billion mega deal will be financed 50 percent in stock and 50 percent in cash. It also confirmed the deal is still some way off from being formally announced with neither company likely to make the news official until July.

Sprint

AT&T to buy DirecTV

Recently, AT&T announced it is looking for DirecTV in a deal valued at $48.5 billion. The AT&T-DirecTV deal will be smoothenig the approval process for the initiative between Sprint and T-Mobile.

On Tuesday, AT&T in a regulatory filing said its acquisition of DirecTV will assist in reducing one of its biggest video costs — TV content — by about 20 percent.

AT&T said that about 60 percent of its video subscriber revenue goes to paying for content for its U-verse TV service. Programming expense reductions will be the most significant part of the combined company’s goal for cost savings to top $1.6 billion on an annual basis three years after the deal closes.

AT&T is gaining more than 38 million video subscribers at home and in Latin America with the purchase of satellite-TV provider DirecTV. In addition, at least 40 percent of annual cost savings will be reached within two years of the deal closing.