Sprint shares drop on T-Mobile deal worry

(Reuters) - Shares of Sprint Corp fell 13 percent on Monday after the telecom company agreed to a $26 billion all-stock deal with rival T-Mobile US Inc that faces antitrust hurdles and is seen as less favorable than an earlier offer, analysts said.

Sprint's shares had gained 27 percent since April 10 following media reports that the companies restarted deal talks. The stock was down at $5.65 in morning New York Stock Exchange trade.

In situations where there is risk that a deal will not win regulatory approval, stocks trade at a discount of 10 percent to 20 percent to the deal price, said Cowen analyst Colby Synesael.

Shareholders of Sprint, controlled by Japan's SoftBank Group Corp, would get $6.62 per share for every share held. Deutsche Telekom AG, T-Mobile's majority owner, will own 42 percent and control the board of the combined company.

"(SoftBank CEO Masayoshi Son) rejected a deal with T-Mobile four months ago that was better for him than the deal he is taking now," said Jonathan Chaplin at New Street Research. "The market is assuming that things must be pretty bleak at Sprint for Masa to return to the negotiating table after a mere four months to take a lower offer."

Sprint and T-Mobile had called off their last merger talks in November, one of the reasons being that SoftBank did not want to cede control of Sprint.

This time the companies touted Trump-led tax reforms, synergies at present value of $43 billion and plans to invest billions on developing 5G network. They are also promising job growth and lower costs for wireless customers.

The companies, however, did not give a regulatory break-up fee, hinting at antitrust hurdles they would need to clear to close the deal.

"The lack of a break up fee suggests that both companies are willing to 'give it a try' from a regulatory point of view given the very significant synergies opportunities," Morgan Stanley analyst Simon Flannery said.

In case the deal falls through, Sprint, which is under stress from its long-term debt of more than $32 billion, will be under much more fundamental stress than T-Mobile, analysts said.

However, brokerage Oppenheimer expects 80 percent approval probability, but with conditions.

Another analyst with CFRA Research said there was a 50 percent chance of getting a regulatory approval.

T-Mobile shares fell 4.2 percent to $61.80 on Nasdaq.

(Reporting by Supantha Mukherjee and Laharee Chatterjee in Bengaluru and Sheila Dang in New York; editing by Anna Driver, Bernard Orr)