T-Mobile Awaits Banks' $23B Loan to Close Sprint Transaction

Zacks Equity Research

T-Mobile US, Inc. TMUS will have to secure an aggregate loan worth $23 billion from a group of 16 banks to successfully close its planned merger with Sprint Corp. S, per a Bloomberg report. The deal is planned to be closed as early as Apr 1. Notably, on Mar 19, T-Mobile announced that it is financially prepared to complete the transaction to raise investors’ morale amid the coronavirus-triggered market volatility.

Management at this Bellevue, WA-based wireless carrier stated that it has been in contact with all 16 banks and received no notice on the banks’ unpreparedness to back the business deal. Reportedly, Barclays Plc, Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group, Inc. GS, Morgan Stanley MS and Royal Bank of Canada are those with the largest exposure.

Yesterday, the banks were formally notified that they will need to make the funds available on Apr 1 so that the two companies can be sanguine about their long-pending merger. Banks will provide a sum of $19 billion through a 364-day bridge loan, which is expected to be refinanced by investment-grade bonds. This adds to a $4-billion seven-year term loan that is likely to be rated high-grade.

T-Mobile intends to refinance the bridge loan in the bond market once the financing conditions recover. The combination, subject to certain closing conditions, is undeniably going to disrupt the competitive landscape of the U.S. telecom market. T-Mobile seems pleased to have assembled 16 leading U.S. and global financial institutions in its committed bridge financing.

On Feb 11, T-Mobile announced that it received a green signal in the Federal Court. Repudiating a lawsuit by a group of states to block the union, the court ruling cleared the decks for creating a strong rival in 5G wireless services to Verizon Communications and AT&T. While Judge Victor Marrero approved the deal without stipulations, the Department of Justice and Federal Communications Commission earlier lent a nod when the carriers agreed to sell some assets to Dish Network.

The New T-Mobile will compete at all price points and customers including prepaid and Lifeline will have access to 5G network and services. With speeds up to five times faster than the current LTE in a few years hence and reaching as much as 15 times more rapidly by 2024, New T-Mobile’s 5G network will likely redefine the way consumers use the Internet. The company plans to deploy a higher quality and more robust network for rural America. Prioritizing vulnerable urban populations will ensure that all Americans have a chance to thrive in the 5G economy.

In the first year, New T-Mobile is expected to have more than 3,500 additional full-time U.S. employees than the standalone companies would have had, and 11,000 more people will be recruited by 2024. Furthermore, plans to build above 600 new retail locations and five new customer experience centers will generate about 12,000 jobs.

Also, T-Mobile secured the Federal Communications Commission’s Special Temporary Authority to use additional spectrum in the 600 MHz Band to meet increased customer demand for broadband during the COVID-19 pandemic. The company continues to take measures for ensuring universal connectivity while practicing social distancing. It also expanded roaming access for Sprint’s customers to use the T-Mobile network.

T-Mobile has a long-term earnings growth expectation of 17.7%. The company’s earnings topped estimates in the trailing four quarters, the beat being 19.5%, on average. Shares of T-Mobile have gained 19.3% against 2.6% decline of the industry in the past year.

T-Mobile currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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