What happened

As the two companies confirmed that they really do want to merge, after all, shares of T-Mobile US (NASDAQ:TMUS) and Sprint (NYSE:S) fell on Monday morning. As of 12:15 p.m. EDT, Sprint shares traded 15.2% lower while T-Mobile stubs had lost 7.1% of Friday afternoon's closing value.

So what

In a joint press release, Sprint and T-Mobile said that they have worked out a stock-swap merger deal that would combine the second and third largest American telecoms into a single business. The surviving company would be called T-Mobile, led by current T-Mobile CEO John Legere and COO Mike Sievert. T-Mobile also gets to keep the chairman's post for the board of directors, though Sprint CEO Marcelo Claure and chairman Masayoshi Son will have seats in that combined boardroom.

In all, T-Mobile parent Deutsche Telekom (NASDAQOTH:DTEGY) will own 42% of the resulting company. Sprint's majority owner SoftBank Group (NASDAQOTH:SFTBY) will hold a 27% ownership stake. Public investors will grab the remaining 31%. Each company's board of directors has given a thumbs-up for the combination, and the merger is expected to close no later than the middle of 2019.

Mural artist drawing a large yellow fish that's about to eat a smaller one

Image source: Getty Images.

Now what

This on-again, off-again relationship has been on the verge of a merger for years. From 2013 to 2017, the two companies have held many rounds of buyout talks. This is just the first time those talks have been allowed to culminate in a real agreement.

Mere rumors of this pending announcement drove Sprint's share prices 18% higher three weeks ago. The actual news sparked the opposite reaction, effectively erasing all of the earlier merger-related boosts from T-Mobile's shares and cutting Sprint's gains in half. Investors on both sides of this deal seem to have expected a more favorable deal than this, and regulatory issues may still stop the deal in its tracks.

All of that being said, Sprint investors should applaud a sensible exit strategy, while T-Mobile owners celebrate the technical and economic benefits that will spring from doubling the wireless network's size. The two tickers should move in tandem until their merger is either consummated or nixed.

Anders Bylund owns one share of T-Mobile US. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.