Sprint, T-Mobile Restart Deal Talks, Once Again - 2nd Update
April 10 2018 - 02:12PM
Dow Jones News
By Drew FitzGerald and Dana Mattioli
Sprint Corp. and T-Mobile US Inc. have rekindled merger talks,
people familiar with the matter said, as the wireless rivals
explore a combination for the third time in four years.
The latest discussions come just five months after a previous
courtship collapsed largely over who would control the combined
firm. The talks also come in the midst of an antitrust fight
between the U.S. government and AT&T Inc.
It is unclear what terms the two sides are considering, and it
is possible, as before, that they could fail to reach an agreement.
The latest discussions are at a preliminary stage, the people
said.
The talks are complicated by the ownership of the two firms.
Japanese telecom giant SoftBank Group Corp. owns nearly 85% of
Sprint. Germany's Deutsche Telekom AG controls T-Mobile, which is
the larger company both in terms of subscribers and market
value.
The combined company, should the two sides successfully strike a
deal, would have nearly 100 million customers, putting it just
ahead of AT&T, which had 93 million U.S. subscribers at the end
of 2017, and behind Verizon Communications Inc., which ended the
year with 116 million. The figures include both prepaid services as
well as monthly subscribers.
Wall Street has long anticipated the marriage and financial
analysts estimate the companies could save billions of dollars each
year by sharing network infrastructure, storefronts and
headquarters.
But the marriage of the No. 3 and No. 4 carriers has run into
hurdles. In 2014 regulators under the Obama administration objected
to the combination, saying four national providers ensure more
choices and lower prices for consumers.
It is unclear what kind of reception the deal would get in the
Trump administration, which has loosened regulations under the
Federal Communications Commission but also sued to block AT&T's
proposed $85 billion takeover of media company Time Warner Inc.
Little has changed in the wireless industry since both parties
last abandoned their talks in early November, though Sprint's share
price has tumbled roughly 20% while T-Mobile has held steady.
Sprint's stock decline has pushed it market capitalization down
to around $21 billion, from about $27 billion five months ago.
Sprint also had more than $32 billion in net debt as of Dec. 31.
T-Mobile has a market value of roughly $50 billion and about $30
billion in net debt.
In November, the two sides said they couldn't agree on terms,
despite an 11th hour meeting at the Tokyo home of Japanese
billionaire Masayoshi Son, who is Sprint's chairman. Mr. Son was
reluctant to give up control of Sprint, people familiar with the
matter said.
SoftBank took control of Sprint for $22 billion in 2013 but has
struggled with years of subscriber defections and billions of
dollars in losses. Meanwhile, T-Mobile used an unlimited data plan
and other marketing moves to add millions of customers in recent
years, eclipsing Sprint as the No. 3 carrier by subscribers.
Each company has since outlined plans to go it alone in an
uphill battle for subscribers now that most Americans have a
smartphone and all four major U.S. providers sell unlimited data
plans.
Sprint pledged to spend billions of dollars on its network and
struck a reseller deal with Altice USA Inc. to let the cable
company use its network for wireless service. It also returned to
the debt markets earlier this year, raising $1.5 billion in
high-yield bonds.
T-Mobile, which spent $8 billion on spectrum in a government
auction last year, said it plans to spend billions more on share
repurchases and airwaves. It paid more than $300 million for a
video-streaming startup and said it would launch its own pay-TV
service later this year.
T-Mobile CEO John Legere sounded open to new deals when asked
about them on a February conference call with industry
analysts.
"Nothing's off the table," he 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 Masa -- you can never say forever."
Joe Flint contributed to this article
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com and Dana
Mattioli at dana.mattioli@wsj.com
(END) Dow Jones Newswires
April 10, 2018 13:57 ET (17:57 GMT)
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