Sprint, T-Mobile Restart Deal Talks, Once Again

For the third time in four years, Sprint Corp. and T-Mobile US, Inc. have started their merger talks again, according to people familiar with the matter, reports The Wall Street Journal.

This is the first discussion since the last merger attempted failed five months ago. Talks fell apart mainly over who would run the merged businesses. The talks are also come in the middle of an antitrust dispute between the U.S. government and AT&T.

The terms of what Sprint and T-Mobile are considering are unclear, so it’s possible an agreement could fail to be reached again. Current discussions are in the preliminary stages, according to WSJ sources.

The companies’ ownership firms, SoftBank, which owns about 85% of Sprint and Deutsche Telekom, which controls T-Mobile, have complicated discussions. Deutsche Telekom is the larger of the two, both in subscriber numbers and market value.

If Sprint and T-Mobile merged, the new company would have almost 100 million customers, putting it ahead of AT&T, which had 93 million U.S. subscribers at the end of 2017. The combined company would still be behind Verizon however, which closed 2017 with 116 million.

Wall Street has been waiting for Sprint and T-Mobile to merge for quite some time, while financial analysts estimate the companies could save billions of dollars annually by sharing network infrastructure, storefronts and headquarters.

The companies ran into a hurdle in 2014 when Obama administration regulators objected to the union because they felt four national providers allowed for more choices and lower prices for customers. How a deal like this would be received in the Trump administration is unclear. On one hand, it did loosen regulations under the Federal Communications Commission (FCC), but on the other, it sued to stop AT&T’s $85 billion takeover of Time Warner, Inc.

Not much as changed in the wireless industry since last November, which is when the parties last talked. Financially, Sprint’s share price has dropped almost 20%, while T-Mobile has remained the same. The Sprint stock decline saw its market capitalization drop from $27 billion to $21 billion in five months. The carrier also had more than $32 billion in net debt as of December 31.

The news of discussion reopening helped elevate both companies’ shares—Sprint 17% and T-Mobile 5.6%.

When talks fell through in November, both carriers laid out plans to continue to go it alone in their fight for subscribers. It’s a tough battle as a majority of Americans have smartphones and all of the major carriers now offer unlimited plans. Sprint plans to spend billions of dollars on its network and reached a deal with Altice USA, Inc. to let the cable company use its network for wireless service. Meanwhile, T-Mobile will spend more money to repurchase shares and airwaves. It will also launch its own pay TV service later in 2018.

”Nothing’s off the table,” T-Mobile CEO John Legere said in response to a question about Sprint. “The pace at which these things are thought about and are going on, and I’m not even going to touch content yet, I think it’s actually accelerating behind the scenes. Some of those things will happen sooner than most people think.”

Sprint CEO Marcelo Claure told investors at a Wells Fargo conference after the deal fell apart that Sprint has a “bright future ahead of us and that there was no need to basically give control to T-Mo,” though he later added, “Those of you know who know (Sprint chairman Masayoshi Son)—you can never say forever.”

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