Wall Street is increasingly nervous about the fate of the proposed merger of
T-Mobile US Inc.
while the lawyers of the companies are preparing to present final arguments on Wednesday in defense of their agreement.
Sprint shares are quoted at a discount of more than 40% on the value of the T-Mobile share offering, which now has a value of approximately $ 34 billion after constant gains in the market value of T- Mobile It is the widest gap since the merger of the two cellular providers merged almost two years ago.
The discount has doubled in recent months as the two companies have become entangled in court with a group of state antitrust officials led by California and New York, a sign of growing doubts about the deal.
"The market is becoming more pessimistic," said Ric Prentiss, an analyst at investment bank Raymond James. He said investors are realizing the risk that "if this agreement is not finalized, Sprint will fall quite hard."
The representatives of Sprint and T-Mobile declined to comment.
The states argue that the combination of the third and fourth largest mobile phone operators in the country would harm consumers. They have maintained their opposition to the agreement despite a series of concessions that both the Department of Justice and the Federal Communications Commission took from both companies last year.
Officials from 13 states and the District of Columbia, all Democrats, took the case to trial in December, forcing several high-profile industry executives to testify on the merits of the transaction. US judge Victor Marrero plans to hear the closing statements of both parties on Wednesday morning in Manhattan. I could give an opinion in a few weeks.
Speaking on Wednesday before the court before closing arguments began, New York State Attorney General Letitia James said he hoped the coalition had proven his case and would win.
Either party could appeal Judge Marrero's decision. But the merger agreement has expired, allowing Sprint or T-Mobile to withdraw without paying a fine. The divergent fortunes of the two companies and the current realities of the market could lead companies to renegotiate the terms if they extend the agreement.
When asked if there could be a pattern of state attorney generals involved in the agreements, James said he would work with his counterparts across the country to enforce the law.
"I don't know if it will be a pattern. I just know that the New York state attorney general and other attorney generals across the country will continue to defend the law," he said, adding that the group was operating within its sovereign powers.
Sprint shares ended Tuesday at $ 4.86 and T-Mobile closed at $ 79.80. From Japan
SoftBank Group Corp.
owns more than 80% of Sprint shares while
Deutsche Telekom AG
control T-Mobile. The relatively small number of Sprint shares in the open market has deepened its latest stock fade.
T-Mobile and Sprint have argued that joining forces would create a stronger and more efficient competitor for market leaders.
Verizon Communications Inc.
Many of the benefits come from its holdings of complementary spectrum licenses, which would reduce the combined costs of the company to transmit music, videos and other data to its customers.
Wall Street analysts say T-Mobile could win billions of dollars in market value if it achieves the merger, although it is also considered a relatively safe bet without Sprint. The company added more than one million cell phone subscribers in the fourth quarter, continuing a trend in customer earnings at the expense of competitors.
The T-Mobile merger partner faces a worse prognosis. Sprint has not yet reported the results of the last quarter, but the company has had trouble retaining its most lucrative customers. He has lost money in four of the last five fiscal years.
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Sprint Executive Director
He testified in December that his company offers "an inferior product" that places it in a "vicious circle" of customer losses and decreased resources. But he and other executives failed to say that the company would disappear in the next two years.
The states challenged the most difficult predictions of the companies during the trial, drawing parallels between T-Mobile's weak balance in 2011, after government opposition forced him to sink a planned link with AT&T, and Sprint's current situation . A recent judicial presentation of the states had a half-full view of their situation.
"With the right leadership and a commitment to innovation, Sprint can follow the precedent of T-Mobile and strengthen its competitive position," the states wrote.
—Sarah Krouse contributed to this article.
Write to Drew FitzGerald at [email protected]
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