Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) shares witnessed a steep decline on Thursday following the regulatory opposition concerning the merger between third and fourth largest U.S. mobile service providers, says a report from Reuters. Shares of both the companies skyrocketed towards the end of 2013 after the report that SoftBank Corp, the owner of 80% of Sprint, was planning to buy T-Mobile from Deutsche Telekom to merge both the companies.
T-Mobile and Sprint Corporation (NYSE:S) shares suffered a setback this year after analyst issued a cautious note regarding the US government approval for a deal.
Regulatory risk to blame
Earlier, the United States Department of Justice and Federal Communication Commission (FCC) stated that they would scrutinize the Sprint/T-Mobile union in depth before giving any approval.
“You cannot get this deal done,” said a source familiar with the matter, adding that commentary from Washington has locked the regulators into public position, which makes the deal less likely.
Roe Equity Research analyst Kevin Roe said that the downfall was due to another report that suggested substantial snag including regulatory approval risks and the amount of any potential break-up fee. Both the shares are in dynamic condition since the starting of this year after the deal became unstable.
Roe added that increased expectations for a Sprint/T-Mobile merger, in the end of 2013, started becoming thin due to the strict talks from the anti-trust division of the DoJ, and press reports regarding the FCC’s stance.
Sprint need to convince the officials
Sprint Corporation (NYSE:S) has to convince the government regarding the benefits of the merger between third and fourth largest wireless carrier. According to Sprint, together with T-Mobile the company would be in a far better and stronger position to pitch competition against AT&T and Verizon Wireless.
However, with the recent success of the carrier regulators are now coming in terms with the fact that a small company might not be at a disadvantage. Over the years, Sprint Corporation (NYSE:S) has started from the slow network rollout and the closing of its Nextel network, and reached significant growth in consumer base.
Sprint shares declined 7% on Thursday to $7.88 compared to the previous session, where it gained 8%. The stock has declined 27% since the late December after hitting a $10.79 peak on speculation that it was preparing for a T-Mobile merger this year.
Shares of SoftBank declined 20.65% over the same period. T-Mobile stock also suffered a decline of 7% on Thursday to $29.55 after closing 5% higher on the previous day. The stock declined 12% from a $33.64 peak in late 2013.