Mint Mobile made a name for itself on two fronts: one, its part-owner and chief spokesman, Ryan Reynolds, and its comparatively inexpensive nature. It did, after all, feature its part-owner heavily in its own advertising, so that, at least theoretically, saved a lot of costs. It was also a cost-saving method not lost on T-Mobile (NASDAQ:TMUS), who purchased Mint Mobile in a deal valued at $1.35 billion. Investors were reasonably pleased as T-Mobile edged up slightly in Wednesday afternoon trading.
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The deal, which is comprised of 39% cash and 61% stock, allows T-Mobile to buy not only Mint but also Ultra Mobile and Plum, a wholesale operation. All of these are part of a larger operation known as Ka’ena. T-Mobile looks to give Mint access to more devices as well as more customers that are looking for value. Thanks to its Metro by T-Mobile plan, T-Mobile has stepped up its offerings in the deals department. Still, it has some stiff competition on that front.
Most of Ka’ena’s staff will remain on hand, including Reynolds, who will remain in the creative position he currently occupies. Ka’ena itself will be run as a separate business unit. The final deal, however, may change, as the purchase price is contingent on certain milestones and working capital levels. Yet, there are signs that T-Mobile may ultimately step some of its pricing down as well; Mike Sievert, T-Mobile’s CEO, notes that Mint’s “marketing formula” is likely to be part of “more parts of T-Mobile.”
Analysts are wholly in favor and currently consider T-Mobile a Strong Buy by a factor of six to one. With an average price target of $180.36, T-Mobile also enjoys 25.08% upside potential.
