Mergers & Acquisitions. Sprint-T-Mobile Term Paper

Mergers & Acquisitions. panache-T-Mobile - Term Paper ExampleThe prospective fusion between T-Mobile and Sprint has evoked mixed opinions among the shareholders of twain the companies. T-Mobile USA is a subsidiary of German based Deutsche Telekom AG (DTE). The tendency of DTE is to sell off the entity to Sprint and own a major stake in the combined entity. (Saitto et.al., 2011) The optical fusion will be positive for both the companies in terms of the market presence. As of now both the companies are the third and the fourth largest operators. This do by would be beneficial for the shareholders of T-Mobile. The shareholders of T-Mobile are already worried with the new-fashioned drop in its share price due to drop in one-quarter-on-quarter profits. Therefore, any possible merger is an opportunity for the shareholders to sell the shares on a price infract that a market price. Moreover, for those shareholders who are not selling off the shares, it is an opportunity for them to get more shares allotted in the new entity. The situation is around different in terms of the shareholders of Sprint. Sprint has a strong engine room back up to deal with all the competitors in the market. Sprint Nextel has partnered with Clearwire to build a 4G wireless ne dickensrk using a technology called WiMax, which is now available in 43 markets. (ABMN, 2010) Sprint is already committed to pay Clearwire Corporation for grammatical construction 4G wireless technology. Sprint is bound to pay Clearwire a minimum amount of $850 million in two years. This can even go up based on the growth in data usage. This deal though was spread over for 2 to 3 years will raise the debt level of the company. A potential merger with T-Mobile will further raise the debt level of Sprint. This will be threatening for the pecuniary position of the company. Eventually this can lead to loss for the shareholders. At this point, it is important to look at the financial position of both the compan ies. T-Mobile has been facing serious decline in its client base and profitability for roughly quarters now. All other players in the market are well equipped with sufficient technologies to trespass the future market. It is difficult for T-Mobile to capture additional customers as they lack the technology strength to do so. Therefore, the customer and profit erosion for T-Mobile will be much faster in the coming years. During the first quarter of 2011, T-Mobile saw its revenue hit $4.63 billion, putting it in line with the first quarter of 2010. However, the companys profit fell over $200 million year over year from $362 million endure year to $135 million in the first quarter of 2011. (Reisinger, 2011) The total customer loss in 2010 alone was 56,000. The second quarter results of the company have shown a decrease in the total assets to $46,291 million from that of $46,299 million. Cash and equivalents have decreased to $109 million from that of $344 million. There is an increa se in the total liabilities of the company. Sprint Nextel is better positioned than T-mobile in terms of the financial position. Unlike T-Mobile, Sprint reported first quarterly revenue later 3 years. Sprint was also undergoing a loss of revenue since 2007. (Bloomberg, 2011) The net incomes were on the negative locating year on year. The first quarterly revenue was in fact a positive business firm that the financial position of the company will pick up. But then the second quarter results were once more on the negative side for the company. (Sprint, 2011) These negative revenues have taken a tall on the funds flow of the company. Especially at this stage when the Sprint is