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The merger between T-Mobile and Sprint looks set to come to fruition, with the U.S. Department of Justice approving the deal in July 2019. In this analysis, we take a look at the potential cost structure of the combined entity using standalone historical data for T-Mobile and Sprint and arriving at projections using expected merger-related costs and synergies. We assume that the deal will close by the end of 2019, with 2020 being the first full year post the merger.
Historical data for Sprint which has a FY ending March 31, has been calendarized for the purpose of this analysis.
A Look At The Key Expense Drivers Of The New T-Mobile
Cost Of Equipment Sales
Consolidated costs of equipment sales would stand at close to $18.7 billion in 2018 for the combined company.
Cost of equipment sales [A + B]
T-Mobile Cost of Equipment Sales [A]
Sprint Cost of Equipment Sales [B]
Sprint And T-Mobile's Total Operating Expenses
Total net operating expenses
What's The Outlook For The New T-Mobile's Key Operating Expenses, After Accounting For Merger Related Costs & Synergies?
Estimating The Costs Likely To Be Incurred To Achieve Synergies
The merged entity will incur costs of about $10 billion relating to network integrations, likely spent over 3 years. (~$3.3 billion per year)SG&A related costs relating to the merger could come in at about $5 billion, spread over 4 years. (~$1.3 billion)This would imply $4.6 billion in total merger costs each year for 3 years, and $1.3 billion for year 4.
Merger related costs