T-Mobile U.S. Inc. and Sprint Corp. are reportedly closer to agreeing on a $32 billion merger deal.
Both telecommunications companies have discussed a possible merger for years, but have put the deal off due to being busy with other business ventures, according to The New York Times.
People familiar with the matter said the deal will likely be announced this summer.
Under the merger, Sprint would pay close to $40 a share for T-Mobile. A formal contract is still being worked on. However, a deal between the third and fourth-largest wireless operators in the U.S. would allow the companies to compete with Verizon Communications Inc. and AT&T Inc., The Wall Street Journal reported.
The unidentified sources added that if the deal is rejected, Sprint would pay T-Mobile over $1 billion in cash and other assets. The deal would need to be approved by the Federal Communications Commission and the Justice Department to move forward.
Sprint is owned by SoftBank, a Japanese telecommunications company owned by billionaire Masayoshi Son. When his company's purchase of the wireless carrier was announced last year, Son, also known as Masa, acknowledged his interest in buying T-Mobile in order to compete with the top wireless companies.
"AT&T and Verizon dominate the industry's Ebitda and capital investment," said Walter Piecyk, an analyst at BTIG Research. "And Masa is making a credible case that they not only need scale to compete more effectively in the wireless industry, but could also offer new and needed competition for wired broadband."
The deal, if completed, would receive a lot of opposition from regulators and antitrust officials.
"Regulators have many deals in front of them and need to consider where the market will be five years from now and how to best stimulate competition, which not only means lower prices but also more investment," Piecyk said.
Antitrust officials shot down AT&T's attempt to buy T-Mobile for $39 billion in 2011, with the Justice Department arguing that four national carriers are needed for the U.S. market to be competitive, The Wall Street Journal reported.
The people familiar with the situation said Sprint would argue that its deal with T-Mobile would increase the country's competitors from two to three, rather than bring it down from four.
