Sprint/T-Mobile US merger talks on again, says report

Sprint/T-Mobile US merger talks on again, says report

Sprint may be set to merge its US mobile business with Deutsche Telekom’s T-Mobile US, three years after abandoning the ambition.

So far news that a marriage may be on again comes entirely from an unattributed report by the Reuters news agency, which says that SoftBank is prepared to give up its majority stake in Sprint.

A deal, should it happen, would create a third giant rival in the US mobile market to AT&T and Verizon. According to Statista, Verizon is market leader with almost 35% in the third quarter of last year; AT&T had 32%; and Sprint/T-Mobile had 31% between them.

Reuters says that SoftBank has made no approach to Deutsche Telekom – but that was the position in July 2014 when rumours were rife that a merger was on the cards. Dan Hesse, then CEO of Sprint, even provided a logical explanation for a merger in an interview, but the idea was dropped – partly because of AT&T and Verizon’s opposition, and partly because SoftBank’s boss, Masayoshi Son, replaced Hesse with Marcelo Claure.

Reuters says one reason for the lack of any approach is that the Federal Communications Commission (FCC) is carrying out a spectrum auction, and it bans any contact during the process.

But the auction ends in April and then “the two parties are expected to begin negotiations”, said Reuters, citing unnamed sources.

The news agency points out that a 2014 deal would have seen SoftBank in control of the merged business, but T-Mobile US has done so well under its CEO, John Legere, that its value has risen from $30 billion to more than $50 billion, while Sprint has remained at around $36 billion.

Sprint had 59.5 million customers at the end of 2016 and T-Mobile US had 71.5 million – compared with the 40 million mobile users that Deutsche Telekom has in Germany.

No one from any of the rumoured parties has commented, but Reuters points out that Tim Höttges, CEO of Deutsche Telekom, no longer wants to part with T-Mobile US, of which it owns 65%.

Son said earlier in February about a potential deal: “We may buy, we may sell. Maybe a simple merger, we may be dealing with T-Mobile, we may be dealing with totally different people, different company.”

But if a merger were to be negotiated, Son and Höttges would have to persuade US regulators to let them the number of operators in the market from four to three. It didn’t work in 2014, thanks to AT&T and Verizon’s behind-the-scenes lobbying in Washington DC, and it might not work in 2017 – though Ajit Pai, the new FCC chairman, is said to be more business-friendly.