T-Mobile and Sprint Merger Continues to Inch Closer to Reality

Why it matters to you

If you’re a customer with Sprint or T-Mobile, this potential merger could mean that you will likely be seeing some major changes.

Although the potential deal has had its ups and downs, it seems T-Mobile and Sprint could be inching ever-slowly toward a merger. If things go their parent companies’ way, the U.S. might end 2017 with three major cellular carriers instead of four.

Here’s what you need to know.

A ‘stock-for-stock’ merger

The parent companies of T-Mobile and Sprint, Deutsche Telekom, and Softbank, respectively, have been in “frequent conversations” about a “stock-for-stock” merger. Most recently, two sources close to the matter claim SoftBank will own 40 to 50 percent of the combined company, while Deutsche Telekom will own a majority stake, Reuters reports.

Not only does the report note that the deal could be reached by the end of October, but a new report from Bloomberg highlights that according to a source familiar with the matter, the deal will be announced during earnings calls at the end of the month. It would also put T-Mobile executives, led by CEO John Legere, in charge of the combined company. That is reportedly important for Deutsche Telekom, which owns 64 percent of T-Mobile.

According to CNBC sources, the deal is at least “weeks” away and chances of reaching an agreement are “not assured.”

Previously, Bloomberg and German newspaper Handelsblatt reported that Deutsche Telekom had made strides towardr a merger. The company reportedly wanted an all-stock deal with Sprint, as well as a contractual agreement to continue T-Mobile’s current marketing strategy after the two carriers combined.

Regulatory hurdles ahead

When the merger was first rumored months ago, SoftBank reportedly hesitated to push forward because of strict Federal Communications Commission (FCC) rules prohibiting rival carriers from conspiring during airwave auctions. And according to CNBC, the risk of rejection by Department of Justice antitrust regulators will play a role in the final decision.

But recent changes at the FCC and Justice Department could increase the likelihood of the merger’s approval.

“Sprint-T-Mobile is a lot more plausible than it was a year ago,” Harold Feld, senior vice president at the policy group Public Knowledge, told Bloomberg. “It’s not a slam dunk. There are real issues. But at the same time, we clearly have an administration that’s sending signals they would be a lot more open to it.”

Merging with the ‘Un-carrier’

Sprint’s biggest merger motivations are subscribers and coverage.

Sprint has been playing subscriber catch-up with rival carriers AT&T, Verizon, and T-Mobile. In July, T-Mobile cemented its position as the nation’s third-largest carrier with 1.3 million customer additions (69.6 million total), while Sprint gained 61,000 (53.7 million).

And the carrier continues to lag behind T-Mobile in terms of coverage. Last year, OpenSignal reported that Sprint took last place in all categories ranging from speed to latency. T-Mobile had an increase in 4G coverage at 81.2 percent — neck and neck with AT&T at 82.6 percent — and trailed closely behind Verizon.

Bringing Charter onboard

There’s a third angle to the Sprint/T-Mobile merger rumors, and it involves cable giant Charter.

Sprint has pursued a merger with Charter that would create a new Softbank-controlled media company, according to the Wall Street Journal. But Charter reportedly has no interest in the arrangement.

Were the deal to go through, U.S. regulators might be less inclined to greenlight Softbank’s T-Mobile merger.

Update: T-Mobile and Sprint could announce a merger in earnings calls before the end of October, according to Bloomberg report.

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