Sprint, T-Mobile Merger Talks Edge Closer but Still Drag On -- Update
October 25 2017 - 11:51AM
Dow Jones News
By Ryan Knutson
Sprint Corp. and T-Mobile US Inc. both took the unusual step of
canceling their earnings calls this week to avoid questions about
their potential merger, a move seen by many as a sign the companies
are close to announcing an agreement.
Yet despite months of talks, there is still no final deal in
hand, according to people familiar with the matter. An agreement to
combine the nation's third and fourth largest cellular carriers by
subscribers could be announced within the next few weeks, the
people said, though it could also still fall apart.
Broad outlines of the deal are largely settled, the people said:
The transaction will be all-stock, and T-Mobile parent company
Deutsche Telekom AG will have control over the combined company.
T-Mobile Chief Executive John Legere will run the combined company.
Sprint Chairman Masayoshi Son will be co-chairman of the board
along with Tim Höttges, the CEO of Deutsche Telekom.
In an unusual twist, the deal will have no cash breakup fee, the
people said. Instead, if the deal is blocked by regulators,
T-Mobile would have to give Sprint an attractive roaming deal so
Sprint's customers can connect to T-Mobile's towers where Sprint
doesn't have coverage, the people said.
The companies are now working on business and network
integration plans and preparing arguments for what is certain to be
intense antitrust scrutiny in Washington. "Haggling over an
agreement is over," said one person close to the deal.
Shares of Sprint, which closed Tuesday at $7, have fallen
roughly 10% in the past month as it became clear the deal wouldn't
carry much, if any, of a premium for the company's investors. The
company has a market value of $28 billion. T-Mobile, whose shares
are down 3% in the past month, has a market value of about $51
billion.
Details of the talks have been widely reported all year, calling
to mind the situation in 2014, when Sprint was poised to acquire
T-Mobile. But the acquisition was never consummated; the companies
backed down in the face of regulatory opposition.
With a Republican administration now running Washington, the
carriers are more confident a deal will be approved. But many
analysts put the odds around 50%.
Rather than risk saying anything that would upset the potential
deal, executives at both carriers released prepared statements
instead of taking questions from analysts this week.
"For obvious reasons, given the noise in the media and in the
market about potential strategic opportunities for Sprint, we are
taking a nontraditional approach to sharing our results with you
this quarter," Sprint CEO Marcelo Claure said in a written
statement posted on Sprint's website.
Both Sprint and T-Mobile reported earnings with few surprises,
as T-Mobile continues to outperform Sprint.
In the three months ending Sept. 30, Sprint added 168,000
postpaid subscribers, down from 344,000 additions a year earlier.
Monthly cancellations, or churn, edged up to 1.72% from 1.52% a
year ago. Sprint's net loss narrowed to $48 million from $142
million last year. Sprint ended the quarter with about 54 million
connections, including 31.7 million postpaid subscribers.
T-Mobile, which reported results Monday, added 817,000 postpaid
subscribers in the quarter and had a $537 million profit. It ended
the period with about 70.7 million customers, including 37 million
postpaid subscribers.
It has been a relatively quiet season in the wireless industry,
with most customers choosing to hold on to their old handsets
instead of upgrading to a new device. Both Sprint and T-Mobile,
which have been known for aggressive discounts, have been less
promotional with the latest devices from Apple Inc. and Samsung
Electronics. Analysts expect choppier results after Apple starts
selling its high-end iPhone X next month.
Drew FitzGerald and Dana Mattioli contributed to this
article
Write to Ryan Knutson at ryan.knutson@wsj.com
(END) Dow Jones Newswires
October 25, 2017 11:36 ET (15:36 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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