Sprint, T-Mobile resume merger talks for the third time

Hoping the third time’s a charm, T-Mobile and Spring has resumed merger talks, according to Bloomberg. The announcement comes just months after the carriers cited an inability to find common ground extending, yet again, the long dance between the two telecom giants. A merger would give the combined company more than 126 million customers and close in on the lead by rivals AT&T (141 million subscribers) and Verizon (150 million).

When the companies were last in merger discussions back in 2017, T-Mobile U.S. President John Legere said any merger would have to be in the long-term interests of shareholders.”We have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record.”

In turn, Sprint President and CEO Marcelo Claure echoed the sentiment: “While we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination. …We are determined to continue our efforts to change the wireless industry and compete fiercely.” On Tuesday, April 10, it looks like Sprint has redoubled its efforts to make the merger work.

Will they or won’t they?

When there were talks of a merger in 2017, reports had suggested that the merger was all but certain. However, a report from Nikkei stated that the board of directors for Softbank (which owns Sprint) was concerned over who would control the combined entity. Those doubts likely helped derail the plans altogether, marking the second time a potential merger between the two companies failed.

The merger would likely mean an improvement in overall 5G wireless technology (which promises greater, pervasive connectivity and faster speeds, but development is costly and complicated) for all customers.

During the merger talks in 2017, the carriers reportedly sought a merger without any asset sales, meaning each would keep the maximum amount of its respective “spectrum holdings and cost synergies … before regulators ask for concessions.” Such an approach could face serious questions from regulators as the Federal Communications Commission prohibits rival carriers from conspiring during airwave auctions. The carriers likely saw a very real concern that such a scheme could be rejected by antitrust regulators with the Department of Justice. However, administration changes in both the Justice Department and FCC made such a rejection less likely.

“It is better for Sprint and T-Mobile to listen and learn the concerns of regulators first, and see whether there is anything that can be done to address those concerns,” MoffettNathanson research analyst Craig Moffett said of the impending deal.

A ‘stock-for-stock’ merger

In the past, the parent companies of T-Mobile and Sprint — Deutsche Telekom and Softbank, respectively — have been in “frequent conversations” about a “stock-for-stock” merger. During their last discussions, two sources close to the matter claimed SoftBank would own 40 to 50 percent of the combined company, while Deutsche Telekom would own a majority stake, Reuters reported in late September.

Previously, Bloomberg and German newspaper Handelsblatt reported that Deutsche Telekom had made strides toward a merger. Those reports also claimed that the company wanted an all-stock deal with Sprint, as well as a contractual agreement to continue T-Mobile’s current marketing strategy after the two carriers combined.

Merging with the ‘Un-carrier’

While both companies would undoubtedly benefit from a merger, Sprint definitely has the most to lose should talks fail once again. The carrier has been playing subscriber catch-up with rival carriers AT&T, Verizon, and T-Mobile. T-Mobile is currently the third largest carrier in the U.S. with 72.6 million subscribers, while Sprint falls into a distant fourth place with around 53.6 million customers.

In addition to subscribers, Sprint continues to lag behind T-Mobile in terms of coverage as well. Earlier this year OpenSignal reported that Sprint was, once again, dead last in all of its categories for its State of Mobile Networks report.

Updated on April 10: T-Mobile and Sprint have resumed merger talks.