April 11, 2018
The will-they/won’t-they flirting between T-Mobile US and Sprint is seemingly back on as the pair head back to the negotiating table for the third time in four years.
The restarted merger talks were originally reported by the Wall Street Journal, though the news has been very positively received by the market. Sprint share price is up over 17%, at the time of writing, while T-Mobile US has increased by 5.5%. The market is clearly excited about such a merger, though it does appear Sprint might need the deal more than T-Mobile US.
Of course it would not be advisable to get too excited just yet, as we’ve been down this path before. Last year the pair were discussing the tie up, only for egos to get in the way as there was no agreement on who would have the controlling voice of the merged entity, while in 2014, regulatory issues killed the deal.
These are still preliminary talks and there is plenty which can go wrong. Little has in the top of the management teams involved, so why anyone thinks the control hurdle has disappeared after only five months is a bit of a mystery. Another factor which might be worth considering is the current administrations seeming opposition to major M&A. The AT&T/Time Warner deal is hanging in the balance, while President Trump killed off the idea of Broadcom acquiring Qualcomm. Reducing competition in the wireless market with the merger of the third and fourth players might not be well received in the current climate.
To remain relevant in the next era of the communications world, something needs to change. T-Mobile US is putting itself in a handy position, but taking the next step to compete with AT&T and Verizon on a level playing field might make the Sprint merger a necessity. A combined business would have just over 120 million customers, just ahead of AT&T but still behind Verizon.
Sprint looks like a business which needs T-Mobile US as well. Excluding the bump experienced over the last 24 hours, share price is down over 40% over the last 12 months as people question how the telco can compete with the top three players. The network is not as good, customer numbers are declining, customer service is deemed poor and the mountain of debt is incredible.
Who needs who more is partly irrelevant, as they both need each other to make a play for the 5G world. A combination of the two networks would offer substantial benefits in terms of consolidated investment strategies, which neither team would say no to. Maybe this is a case of third time lucky?
About the Author(s)
You May Also Like