The shares of Sprint Corporation (NYSE:S) rallied as much as $11.47 per share on Friday over speculations that third largest wireless carrier in the United States will merge with T-Mobile US, Inc (NYSE:TMUS), the fourth largest wireless communications provider in the country.
Sprint Corporation (NYSE:S) ended the trading session with 8.3% gain to $10.79 per share today, which is the biggest one-day gain since July when Japanese firm, Softbank Corp (TYO:9984) became the majority owner of the U.S. based wireless carrier. Since the acquisition, the stock price of Sprint doubled.
Early this week, it has been reported that Softbank Corp (TYO:9984) is moving closer to striking a merger deal with T-Mobile US, Inc (NYSE:TMUS). The deal is estimated to be around $19 billion. According to people familiar with the situation, Masayoshi Son, founder and chief executive officer of Softbank held talks with certain banks regarding the financing for a potential transaction with the fourth largest wireless carrier.
Son aims to position Softbank Corp (TYO:9984) as the second largest telecommunications company by revenue worldwide by acquiring T-Mobile US, Inc (NYSE:TMUS).
Jennifer Fritzsche, analysts as Wells Fargo & Company (NYSE:WFC) commented that a merger between Sprint Corporation (NYSE:S ) and T-Mobile US, Inc (NYSE:TMUS) will establish a stronger competitors against AT&T Inc (NYSE:T) and Verizon Communications Inc (NYSE:VZ). The merger will also control the price cutting strategies of T-Mobile and will help improve the industry.
“Part of the plan all along has been for these two — No. 3 and No. 4 — to come together. I very much think, where there’s smoke there’s fire,” said Fritzsche during an interview with Bloomberg Television’s In the Loop with Betty Lie. The analyst has a rating equivalent to buy for the shares of Sprint Corporation (NYSE:S).
Observers in the industry believe that a merger transaction between Sprint Corporation (NYSE:S) and T-Mobile US, Inc (NYSE:TMUS) will face regulatory challenges particularly from the Department of Justice DOJ) and Federal Communications Commission (FCC). Regulators rejected the proposal of AT&T Inc (NYSE:T) to acquire T-Mobile two years ago.