Sprint, T-Mobile Look Again At Merger -- WSJ
April 11 2018 - 3:02AM
Dow Jones News
By Drew FitzGerald, Dana Mattioli and Joe Flint
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 11, 2018).
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 ended largely over who would control the combined
business. The talks also come in the midst of an antitrust fight
between the U.S. government and telecommunications giant AT&T
Inc.
It is unclear what terms Sprint and T-Mobile 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 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 a deal go through, 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 of the No. 3 and
No. 4 carriers, and financial analysts estimate the companies could
save billions of dollars each year by sharing network
infrastructure, storefronts and headquarters.
But a prospective merger of the two has run into hurdles in the
past. 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 had tumbled roughly 20% through Monday while T-Mobile held
steady.
Sprint's stock decline pushed its 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.
Both companies' shares advanced Tuesday after The Wall Journal
reported on the latest discussions. Sprint surged 17% to $6.02,
while T-Mobile gained 5.6% to $63.13. Sprint ended Tuesday with a
market value of about $24 billion. T-Mobile has a market value of
roughly $54 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."
Write to Drew FitzGerald at andrew.fitzgerald@wsj.com, Dana
Mattioli at dana.mattioli@wsj.com and Joe Flint at
joe.flint@wsj.com
(END) Dow Jones Newswires
April 11, 2018 02:47 ET (06:47 GMT)
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