Sprint and T-Mobile said to agree tentative terms of merger

Shares in Sprint Corp rallied in pre-market trade following reports it is close to agreeing tentative terms of a deal to merge with T-Mobile.

Reuters cited people familiar with the matter as saying that SoftBank Group, which controls Sprint, would own between 40% and 50% of the combined group, while T-Mobile owner Deutsche Telekom would own a majority stake.

Sources said that once the deal term sheet has been finalised, both companies will carry out due diligence, with a deal expected by the end of next month. However, they added that there is no certainty the talks will be successful.

In a note released earlier this week following reports that T-Mobile and Sprint were in active merger talks, RBC Capital Markets said: "Following recent discussions with regulatory contacts, including earlier this week, we continue to believe the likelihood of a Sprint/T-Mobile deal approval is around 35%-40% based on criteria we believe the DoJ would apply around industry structure and competitive impacts, and the lack of overarching political support in favour of the combination, in our view."

It added that a combined company would have 139 million subscribers, equivalent to AT&T.

At 1255 BST, Sprint shares were up 4% in pre-market trade to $8.35 while T-Mobile was up 1.3% to $64.20.