The premise sounds reasonable enough: Combine two companies operating in the same industry and eliminate overlapping expenses. The result is more total profit than the two organizations would be able to achieve between themselves on their own. That's why the recently green-lit merger of telecommunication companies Sprint (NYSE: S) and T-Mobile (NASDAQ: TMUS) has stoked investor optimism.
Japan's billionaire investor Masayoshi Son is stoked as well. His company, SoftBank (OTC: SFTBF), will be a partial owner of the new entity, though his 27% stake still won't be quite as big as the 42% that the merged outfit Deutsche Telekom (OTC: DTEGF) will hold. Both major shareholders believe the combination can compete with wireless industry leaders AT&T (NYSE: T) and Verizon (NYSE: VZ). Sprint and T-Mobile just need more scale to drive even greater profit growth.
History shows that the suggested synergies of the merger aren't guaranteed, though, and there's some data to back the idea up.