Sprint (NYSE:S) has been the smallest of the major wireless carriers in America for the last four years. While the other industry giants boosted their subscriber numbers by millions of new names, Sprint's customer Rolodex grew 4% slimmer.

The company found an exit strategy last year when sector peer T-Mobile US (NASDAQ:TMUS) launched a stock-swap buyout bid. Eighteen months later, the deal is inching closer to the finish line.

Ideally, Sprint will have consummated the T-Mobile deal within the next 52 weeks. Here's what will happen if the merger closes without further incident -- and what's next if that happy ending never arrives.

Why T-Mobile loves Sprint

This merger is simple at a glance. If approved, Sprint's shareholders will have their stubs exchanged for T-Mobile stock at the rate of 9.75 Sprint shares per T-Mobile equivalent. The combined company would sport roughly 138 million subscribers if it happened today, still a third-place finish behind Verizon's 154 million and AT&T at 160 million, but a good deal closer than either T-Mobile or Sprint on their own.

Besides the instant boost to T-Mobile's subscriber tally, Sprint also brings along a meaty selection of radio spectrum licenses. Most of Sprint's licenses are sitting in the 2,500-MHz band where T-Mobile doesn't have any representation at all. These high-frequency radio signals are ideally suited for dense coverage in markets where data speed matters more than a long connection range, like in large cities.

Importantly, a large portion of Sprint's radio licenses have been left unused since the company couldn't afford to invest as much in network improvements as it would have liked. T-Mobile would change that shortcoming in a hurry. In fact, the deal has been marketed as an important step toward allowing T-Mobile to compete with a healthy 5G platform.

If the merger is completed as planned -- and not hobbled by regulatory concessions along the way -- Sprint basically will become an important cog in T-Mobile's evolving business model. Sprint shareholders, led by majority shareholders Masayoshi Son and Softbank, will end up owning roughly 40% of the combined entity. Thanks to approvals from the Department of Justice and the Federal Communications Commission, this is starting to look like the most likely outcome.

But it's not a done deal quite yet. Legal challenges from District Attorneys in 16 states and the District of Columbia could still wreck the agreement right before the final John Hancock.

A young woman in a business suit holding her phone in one hand and frowning.

Image source: Getty Images.

Falling apart at the seams

A failed merger would be terrible news for Sprint shareholders. It's a real risk, reflected in Sprint shares, which are trading at a 23% discount to T-Mobile's final offer. Not to pummel a deceased mustang, but Sprint is burning cash and losing customers. That's not a sustainable long-term business in my book.

It's hard to say exactly how terrible the shareholder damage would be, but important profit measures such as earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow have been plunging since the deal was announced. It's safe to say that the stock should be worth less than it was in April of 2018, but it gained 15% over that period.

The T-Mobile buyout is Sprint's last hope for a dignified exit strategy. As a separate company, Sprint's painfully negative business trends will likely continue until Sprint drops out of the Big Four entirely. This version of the story has no happy ending.