Sprint, T-Mobile Restart Deal Talks, Once Again

Sprint Corp. S 17.12% and T-Mobile US Inc. TMUS 5.67% 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. 9984 4.81% owns nearly 85% of Sprint. Germany’s Deutsche Telekom AG DTEGY 3.89% 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.”

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The U.S. wireless industry is dominated by four major players: Verizon, AT&T, T-Mobile and Sprint. Now that just about everyone has a cellphone, each operator is looking for new ways to grow. But how did we go from the days of one giant landline monopoly to four competitive cell companies? Illustration: Shaumbe Wright/WSJ

Write to Drew FitzGerald at andrew.fitzgerald@wsj.com, Dana Mattioli at dana.mattioli@wsj.com and Joe Flint at joe.flint@wsj.com

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