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T-Mobile US Inc. (NASDAQ: TMUS) and Sprint Corp. (NYSE: S) finally have agreed to merge. The combination of Sprint and T-Mobile will become the second largest wireless carrier after Verizon Communications Inc. (NYSE: VZ) if regulators approve the deal. There is obviously some deal-closing regulatory risk as the initial trading sent Sprint shares lower with almost a 15% discount to the deal-closure ratio.

The two companies agreed to merge in an all-stock transaction at a fixed exchange ratio of 0.10256 T-Mobile shares for each Sprint share. This is the equivalent of 9.75 Sprint shares for each T-Mobile share. The combined entity would have roughly 100 million customers. More than one aspect of this proposed merger must be considered, but one of the least covered yet most important, outside of regulatory approval risks, is the current debt load that needs to be dealt with in the coming years.

At the end of 2017, Sprint had almost $33 billion in long-term debt. The current portion of long-term debt was $5 billion. And when it comes to evaluating T-Mobile, investors will need to consider what happens to the credit ratings and debt level for parent Deutsche Telekom, which is based in Germany. T-Mobile had a long-term debt load of $12.1 billion at the end of 2017, while its total liabilities hit $40 billion. Deutsche Telekom had roughly €50 billion worth of debt as of the end of 2017.

It seems obvious that a combined Sprint and T-Mobile would be in a stronger position in the ongoing rivalry against AT&T Inc. (NYSE: T) and Verizon. According to T-Mobile, the company would have a stronger balance sheet and would come with a fully funded business plan with an investment grade rating.

Regulators have to weigh what it means for consumers for the wireless wars to go down to three players from four. Still, questions have remained in recent years over whether Sprint can make it on its own as a standalone player. Softbank in Japan owns the majority stake of Sprint.

Fitch Ratings placed Sprint and its B+ rating on Ratings Watch Positive due to a more powerful company taking on its balance sheet woes. In fact, Fitch believes the deal would make for a three-notch upgrade on Sprint’s credit rating based on the initial assumptions. And Fitch further commented that the merger would substantially strengthen the credit support for existing bondholders of Sprint’s debt. With an expected EBITDAR ratio of five times for the combined company at closing, Fitch expected material deleveraging over the next two years down to the lower four-times range.

Moody’s placed T-Mobile unsecured debt on review for a possible downgrade, while placing Sprint’s credit on review for an upgrade. The agency sees the combined company having a better cost structure and believes it will be better able to invest in a 5G network. The integration risk still cannot be ignored, and that could send customers elsewhere.

Meanwhile, Standard & Poor’s put Deutsche Telekom’s BBB+ credit rating on review for downgrade. While S&P sees some long-term benefits, the combined company will come with lower cash flows and increased leverage during the first two years after closing the merger. S&P is projecting close to $15 billion in total integration costs over a five-year period.

Still, Deutsche Telekom itself previously said that the merger should not affect its full-year outlook for 2018. It was also telegraphed not to lower the parent company’s broadband investment plans in Germany.

Based on closing share prices on April 27, the corporate press release implied a total implied enterprise value of approximately $59 billion for Sprint and approximately $146 billion for the combined company. That will be a rather large entity, and a lot of that consideration is around the corporate debt.

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Elsewhere, analysts at sell-side firms on Wall Street have made equity-focused calls for Sprint and T-Mobile common shareholders.

• Wells Fargo downgraded both wireless carriers to Market Perform from Outperform.
• Guggenheim raised Sprint to Neutral from Sell on the news.
• Citigroup maintained its Neutral rating on Sprint, while raising its target to $7.00 from $6.50. Citigroup maintained T-Mobile at Buy and raised its target to $83 from $76.

Sprint shares were last seen down 13% at $5.66, and T-Mobile shares were last seen down 5% at $61.08 on Monday’s early trading. While this deal had been all over the rumor mill over the past week or so, it hasn’t exactly received the warmest reception from investors.

AT&T shares were last seen up just 0.4% at $33.20 Monday morning, and Verizon shares were down 1.6% at $50.75.