Sprint, T-Mobile Surge as Executives Express Optimism for Merger

(Bloomberg) -- Sprint Corp. and T-Mobile US Inc. soared after executives of both companies expressed optimism that their $26.5 billion merger is headed for approval.

“We have been participating with regulators through the review process and we feel pretty good about our chances,” T-Mobile Chief Executive Officer John Legere said Tuesday in an interview after the company reported third-quarter earnings.

Wednesday is the final day for opposing arguments to be filed with the Federal Communications Commission. The companies have argued that they need each other to keep up the pressure on the two biggest carriers -- Verizon Communications Inc. and AT&T Inc. -- and build a next-generation wireless network. Regulators must decide whether consolidation of the two most aggressive competitors can be good for consumers.

Still, the merger isn't a shoo-in yet.

“After all of our poking, prodding and analysis, we've yet to find an argument for or against that is significantly more persuasive than its counter,” Craig Moffett, an analyst with MoffettNathanson LLC, said in a note Wednesday. Moffett puts the odds of approval at 50-50.

Upbeat Earnings

Both Sprint and T-Mobile just posted upbeat earnings as the regulatory review continues. Sprint, which has had a decade of losses, still needs a merger despite signs that the business is stabilizing.

The Overland Park, Kansas-based company has argued that without the T-Mobile deal, it faces dire financial conditions. “Sprint has not been able to turn the corner with respect to its core business challenges,” the company said in an FCC filing last month.

Sprint shares were up as much as 12 percent to $6.36 in New York, the biggest one-day jump since April. T-Mobile rose as much as 8.9 percent to $69.60.

So far, the lack of highly vocal opposition to the deal has been seen as a signal that approval is possible. And wireless services from cable giants Comcast Corp. and Charter Communications Inc. give regulators some new mobile competition to point to.

The signs from Washington suggest a 70 percent chance that the deal gets regulatory approval, according to Wells Fargo & Co. analyst Jennifer Fritzsche. “It is not out of the realm of possibility to see approvals by first quarter 2019.”

Sprint CEO Michel Combes expects the deal to close in the first half of 2019. The companies already have approvals from more than half of the country's state public utilities commissions, he said Wednesday at a press conference.

“We've completed a number of milestones,” Combes said.

To contact the reporter on this story: Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Rob Golum, John J. Edwards III

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