What's Up With Sprint And T-Mobile?

Shares of Sprint Corp S rose more than 7 percent Tuesday morning while shares of T-Mobile US Inc TMUS gained 5 percent after CNBC's David Faber reported the two mobile companies are in active merger talks.

Sprint along with its parent company Softbank and T-Mobile and its parent company Deutsche Telekom could be weeks away from finalizing an agreement that would merge the two companies together, Faber suggested. The deal may consist of a stock-for-stock merger under which T-Mobile's parent company, Deutsche Telekom, will become the majority owner.

As is always the case, the chances of a deal finalizing are not guaranteed, Faber continued. The two companies were engaged in "meaningful" talks earlier this year at which point Softbank was open to the idea of selling its stake. However, this time around, Softbank is demanding to remain a significant, although still minority shareholder in the combined entity.

A merger of the two companies could generate billions of dollars' worth of cost synergies and savings and see John Legere, T-Mobile's current CEO, lead the combined entity. But Softbank's CEO Masayoshi Son is still demanding a say in the company's direction, which may add a layer of complexity to the already difficult talks.

Finally, the biggest obstacle to any deal would come from government regulators, Faber concluded. The merger of Sprint and T-Mobile would combine the number three and number four wireless carriers into one company and it is not clear if the Department of Justice would sign off on such a deal.

Related Links:

Sprint And T-Mobile Surge Following Merger Rumors; Talks Expected To Begin In April

T-Mobile To Bundle Netflix Subscription With New Family Plans