By Greg Roumeliotis
(Reuters) - U.S. wireless carriers T-Mobile US Inc <TMUS.O> and Sprint Corp <S.N> are finalizing terms as they seek to sign a merger by Monday that could value Sprint at around $26 billion, people familiar with the matter said on Friday.
The combined company, with more than 127 million customers, would have added clout to challenge industry leaders Verizon Communications Inc <VZ.N> and AT&T Inc <T.N> in the race to expand offerings in next-generation 5G wireless technology.
T-Mobile majority-owner Deutsche Telekom <DTEGn.DE> will own a little over 40 percent of the combined company, but will have voting control so it can consolidate the company on its books, the sources said. The sources requested anonymity to discuss the confidential negotiations.
Sprint shares ended up 8.3 percent at $6.50 on the news first reported by Reuters, close to where the deal values the company based on the implied stock exchange ratio tied to T-Mobile's shares. T-Mobile shares rose 0.6 percent to $64.52, giving the company a market capitalization of $55 billion.
T-Mobile and Sprint are aiming to announce the deal on Sunday, though the timing could change, the sources said. Talks between Deutsche Telekom and Japan's SoftBank Group Corp <9984.T>, Sprint's controlling shareholder, could still end unsuccessfully at the last minute, the sources added.
Deutsche Telekom owns more than 63 percent of T-Mobile, while SoftBank owns 84.7 percent of Sprint.
Sprint, T-Mobile, Deutsche Telekom and SoftBank did not respond to requests for comment.
The companies came close to a merger deal in November before SoftBank Chief Executive Masayoshi Son pulled out of the talks at the last minute over valuation disagreements. Deutsche Telekom CEO Tim Hoettges left the door open by saying, "You always meet twice in life."
Even though Sprint's customer base has expanded under CEO Marcelo Claure, growth has been driven by discounting. Analysts have said that without T-Mobile, Sprint lacks the scale needed to invest in its network and to compete in a saturated market.
T-Mobile, under CEO John Legere, has fared better than Sprint, even if it remains a distant third to Verizon and AT&T. It has scored sustained market share gains, as innovative offerings, improving network performance and good customer service attract new customers, according to Moody's Investors Service Inc.
T-Mobile became the first major U.S. carrier to eliminate two-year contracts, a shift quickly embraced by consumers and copied by competitors. The company has also unsettled rivals with its unlimited data plans.
Regulatory hurdles could also block to the deal. Sprint and T-Mobile's first round of merger talks ended in 2014 after U.S. President Barack Obama's administration expressed antitrust concerns about it.
AT&T agreed to acquire U.S. media company Time Warner Inc <TWX.N> in October 2016 for $85 billion. The U.S. Department of Justice has sued to block the deal over concerns about the companies' pricing power in the media market. AT&T and Time Warner are defending their proposed merger in court.
The U.S. government has also opened a probe into alleged coordination by AT&T, Verizon Communications and a telecommunications standards organization to hinder consumers from easily switching wireless carriers, a person briefed on the matter said last week. This signals U.S. regulators' growing concern about consumer prices.
(Reporting by Greg Roumeliotis in New York; Editing by Nick Zieminski and Richard Chang)