T-Mobile / Sprint: Where Are We Now?

We hosted two conference calls last week during which Blair and I attempted to answer investors’ questions on the meandering course of the deal. In this note, we review where the deal stands today . In addition to links to our written work over the past week, we have included links to lightly edited audiocasts for both conference calls.

The first conference call was on Monday, which followed on the heels of the announcement that morning that the FCC Chairman was supporting the deal (LINK). We assumed, based on precedent, that the DOJ would be aligned with the FCC’s analysis and would come to the same conclusion. We were about midway through the call when news broke that the DOJ staff is not satisfied with the conditions that the FCC struck with the companies. The second audiocast was on Wednesday, in response to more definitive reports that the DOJ staff would oppose the deal, leaving Delrahim in an awkward bind (LINK). We will be hosting these audiocasts on our website in due course, as well as on iTunes. We would love your feedback (and we apologize in advance for the less than stellar audio quality; Blair and I were both travelling and so had to conduct the calls from cellphones).

We also published a few reports on the deal during the course of the week. Blair started on Monday morning, with a note on what we thought was next (LINK). The ink was barely dry, when he put out an update with evolving thoughts as it became clear that the DOJ staff may not share the FCC Chairman’s enthusiasm (LINK). He followed this up with further updated thoughts on Wednesday (LINK). We published a report on Wednesday too, exploring potential conditions and the impact they may have on the valuation of the companies (LINK). This note covers important ground, addressing the two questions we heard most frequently last week: are there conditions that could get the deal across the goal line, and; if so, would we still want to own Sprint or T-Mobile if they accepted them?

We will emerge from a much needed long-weekend on Tuesday with the probable fate of the deal resting in Delrahim’s hands. Blair has written that the courts will most likely side with the DOJ, whether they approve or block (though the odds of the DOJ’s position prevailing may be slightly stronger if they sue to block than if they approve, assuming the latter outcome elicits a strong challenge from state AGs). I have argued that there are conditions that ought to get the deal across the finish line, though it remains to be seen whether the companies would accept them. We argue in our report from Wednesday that even the most onerous condition that we consider would result in a deal that is better for T-Mobile and Sprint than the status quo (LINK). It seems that the DOJ and the companies are working to find a middle ground (LINK). We will know in the next 3-4 weeks whether they succeed.

Later today, Blair will publish a weekend update on the key pivot points for the deal in the next few weeks, and potentially months (now published: HERE). He will also publish a weekend update focusing on another question we heard a lot last week: what is the impact of the FCC announcement on the C-Band process (now published: HERE).

We wish you all a fun and relaxing Memorial Day, and we look forward to engaging with many of you again on Tuesday.

Full 12-month historical recommendation changes are available on request

Reports produced by New Street Research LLP. 52 Cornhill, London EC3V 3PD Tel: +44 20 7375 9111.

New Street Research LLP is authorised and regulated in the UK by the Financial Conduct Authority and is registered in the United States with the Securities and Exchange Commission as a foreign investment adviser.

Regulatory Disclosures: This research is directed only at persons classified as Professional Clients under the rules of the Financial Conduct Authority (‘FCA’), and must not be re-distributed to Retail Clients as defined in the rules of the FCA.

This research is for our clients only. It is based on current public information which we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Most of our reports are published at irregular intervals as appropriate in the analyst's judgment. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients.

All our research reports are disseminated and available to all clients simultaneously through electronic publication to our website.

New Street Research LLC is neither a registered investment advisor nor a broker/dealer. Subscribers and/or readers are advised that the information contained in this report is not to be construed or relied upon as investment, tax planning, accounting and/or legal advice, nor is it to be construed in any way as a recommendation to buy or sell any security or any other form of investment. All opinions, analyses and information contained herein is based upon sources believed to be reliable and is written in good faith, but no representation or warranty of any kind, express or implied, is made herein concerning any investment, tax, accounting and/or legal matter or the accuracy, completeness, correctness, timeliness and/or appropriateness of any of the information contained herein. Subscribers and/or readers are further advised that the Company does not necessarily update the information and/or opinions set forth in this and/or any subsequent version of this report. Readers are urged to consult with their own independent professional advisors with respect to any matter herein. All information contained herein and/or this website should be independently verified.

All research is issued under the regulatory oversight of New Street Research LLP.

© Copyright 2021 New Street Research LLP

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of New Street Research LLP.