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Investors are "overly optimistic": Sprint and T-Mobile merger will finally take place, analysts say

The merger between Sprint and T-Mobile may finally be close to the approval of the Justice Department – but two analysts argue that a combination has not yet occurred.

"It's hard to accept a strong chance that the deal will be approved," BTIG's Walter Piecyk told "Squawk Box" on Monday, referring to discussions between telecom companies Sprint and T- Mobile.

"The question is whether T-Mobile has to give up so much, that we need to create a fourth stronger competitor than there would be if T-Mobile was saying, you know what, let's leave this deal disappear. "

The New York Times reported Friday that a merger approval for Sprint and T-Mobile could be close. The decision depends on Makan Delrahim, the Department of Justice's largest antitrust regulator, who recently approved the acquisition of 21st Century Fox by the Walt Disney Company, but sued to block the deal between AT & T and Time Warner. He eventually lost the latter case in court.

"Nobody really knows what Makan wants to do in this deal," Piecyk said. "We are facing a very uncertain regulatory environment, making it more difficult to make these strategic decisions."

For Piecyk, the chances of an agreement being reached are "less than 50-50."

Craig Moffett of MoffettNathanson sees a similar scenario unfold, as he also explained to "Squawk Box" on Monday.

"Even if you say that 70-30 Delrahim approves it, 70-30 states lose and that agreement goes on, even if you only talk about a 49% combined chance that the # I agree that people are still too optimistic that this case is done. "

Moffett also wrote a post at the end of May calling for talks on the "Crazy Town" merger.

For the agreement to be reached, Sprint and T-Mobile are expected to sell the prepaid mobile service Boost, currently owned by Sprint. Bloomberg said the companies had contacted Altice, Charter and Dish Network about the sale of the service. This asset, along with Sprint-owned broadcasts, is being litigated by four attorneys general in New York and California.

For Moffett, these companies are placed in strategic conditions. "What the DOJ, what Delrahim really wants, is to create a set of conditions that allow T-Mobile to decide to leave, so that it has never put itself in the uncomfortable position of saying yes or no."

"There is always a real chance that this agreement will be blocked in one way or the other."

Piecyk also does not see much benefit from the merger. "T-Mobile's self-sustaining, they have free cash flow, they can buy back shares … Sprint just needs to invest in. And at this point it may be too late because the brand is maybe too much damage, and maybe something that Meakin needs to consider. "

"It has been a very strange process."

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