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Sprint, T-Mobile hop on merger-go-round

A $50 billion deal is reportedly in place. A Sprint-T-Mobile merger would create a stronger No. 3, but risks abound.

Sprint is reportedly nearing a final agreement to acquire T-Mobile in a deal valued at about $50 billion.

According to the Wall Street Journal, Sprint would pay T-Mobile shareholders about $40 a share. T-Mobile closed at $34.28 on Tuesday. The news comes shortly after AT&T announced plans to buy DirecTV.

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If the merger worked out---and regulator scrutiny will be intense---the combination of Sprint and T-Mobile would create a strong No. 3 to compete with Verizon and AT&T. The rub is that the merger would take away T-Mobile, which has been aggressive with its plans and given larger players a few headaches. T-Mobile is probably the biggest threat to Sprint's future

The risks and benefits break down like this:

  • Benefit: Sprint and T-Mobile would have more scale to improve coverage and compete with AT&T and Verizon.
  • Risk: Consumers would lose an option in carriers.
  • Benefit: Sprint and T-Mobile would be able to acquire more spectrum.
  • Risk: Sprint and T-Mobile have different networks and it's unclear the work and timeline involved to combine LTE, GSM and CDMA networks with a dash of WiMax thrown in.
  • Risk: Regulators may not approve a Sprint-T-Mobile deal. The Journal noted that Sprint would pay a $1 billion fee if regulators shot the merger down.