MANHATTAN (CN) – Sprint and T-Mobile announced a $26.5 billion merger on Sunday, promising the development of historic nationwide high-speed 5G wireless network and massive economic growth.
Representing the country’s third- and fourth-largest mobile wireless companies, Sprint and T-Mobile said they expect the deal to close by the first half of 2019.
The deal must still face review by antitrust regulators at the Justice Department and the Federal Communications Commission, however, and some analysts have given the deal only 50-50 odds of approval.
Shares of Sprint fell nearly 13 percent to $5.63 Monday, slipping below the $6.62 price initially laid out in the deal. T-Mobile also dropped, nearly 6 percent to $60.72.
The new combined company, which will be named T-Mobile, expects their development of 5G to create 3 million new U.S. jobs and $500 billion in economic growth by 2024, according to a report from the telecommunications trade association CTIA.
T-Mobile promises wireless customers that the combined company will deliver 15 times faster speeds on average nationwide by 2024, “with many customers experiencing up to 100x faster speeds than early 4G.”
According to statements from the companies, based on closing share prices on April 27, the merger represents a total implied enterprise value of approximately $59 billion for Sprint and approximately $146 billion for the combined company.
The company also forecast that the merger will benefit shareholders through more than $6 billion in run-rate cost synergies.
T-Mobile’s John Legere will serve as CEO of the combined company with T-Mobile’s Mike Sievert on board as president and chief operating officer.
Sprint’s Marcelo Claure compared going from 4G to 5G to the groundbreaking switch from black-and-white television to color, calling it a “seismic shift.”
“The combination of these two dynamic companies can only benefit the U.S. consumer,” Claure said in a statement Sunday. “Both Sprint and T-Mobile have similar DNA and have eliminated confusing rate plans, converging into one rate plan: Unlimited.
“We intend to bring this same competitive disruption as we look to build the world’s best 5G network that will make the U.S. a hotbed for innovation and will redefine the way consumers live and work across the U.S., including in rural America,” the Sprint executive added.
The companies claim that their main competitors Verizon and AT&T are not equipped to deliver a nationwide 5G network in the United States.
According to a press release, the two wireless competitors would “have to kick current customers off LTE, which would take years, or use a type of spectrum (millimeter wave) that can only carry a signal 2,000 feet from a cell site – versus multiple miles for other spectrum – making it nearly impossible for either of them to create a truly nationwide 5G network quickly.”
Sprint and T-Mobile plan to invest up to $40 billion in their merged network in the first three years, which executives said would drive more hiring and better service for customers.
The 5G aspirations are at the heart of the agreement, and the new technology could allow companies to provide faster service to people’s homes, making references to the “Internet-of-Things” concept in which millions of everyday electronic devices are all connected by wireless internet accessibility.
The CTIA trade association billed the development of 5G as a global competition, with “countries like China, South Korea, and Japan … doing everything they can to win.”
A fact sheet from the group estimates that one out of every 100 Americans will benefit from a new 5G job.
In 2014, a deal between the two companies fell apart after concerns that Obama-era antitrust regulators intervened.
The new company will be headquartered in Bellevue, Washington, with a second headquarters in Overland Park, Kansas.
Sprint is controlled by Tokyo-based SoftBank Group Corp. and T-Mobile is owned by Germany’s Deutsche Telekom AG, which will be the largest stakeholder of the combined company.