Bloomberg, Sprint and T-Mobile are apparently resuming discussions with regards to a possible merger deal. The report cited sources familiar with the development, and these people say that the third and fourth biggest wireless carriers in the country see a mutual advantage in combining their resources to be more competitive against industry leaders Verizon Wireless and AT&T. It bears noting that even if Sprint and T-Mobile add up their respective subscriber bases, the total number will still be fewer than either Verizon or AT&T. But if a merger happens, it would grant them the additional scale to actually start challenging the duopoly.
Even though talks of a Sprint-T-Mobile merger may have already re-started, many still expect the discussions to be hardly a simple matter. As reported by the New York Times, Masayoshi Son, the chief executive officer of SoftBank (the parent company of Sprint), is looking to have SoftBank create a new holding company that would have a controlling interest in the merged business entity, instead of striking a direct acquisition deal.
The New York Times further reported that Son had first proposed such an arrangement to Charter Communications, even though Sprint has a market value of around $34 billion compared to Charter’s $99 billion. But a spokesperson for Charter has made it clear last week that the cable giant is not interested in acquiring Sprint. Interestingly, Son had reportedly also made a similar proposal to Comcast, who like Charter, had no interest in the offer.
According to the Bloomberg report, Son may be pressured to find an integration partner because of Sprint’s considerable impending debt maturities. The fact of that matter is Sprint has suffered significant losses since SoftBank acquired the carrier back in 2013, and the debts it has piled up since are coming due soon. To the company’s credit, recent cost restructuring efforts have allowed it to post its first profit in three years.
For all its financial woes, Sprint remains an attractive target because of its deep spectrum holdings. If the carrier does end up merging with another company, the other party (or the combined entity for that matter) would find itself in a good position to make full use of Sprint’s spectrum assets, just as the whole industry is starting to transition to the 5G era.