T-Mobile and Sprint are back in active merger talks, CNBC reports. These rumblings come from an insider who has asked not to be identified.
This news comes as no surprise to most industry experts. The third and fourth largest mobile carriers first considered such a move in 2014. Sprint pulled out when it became clear that the deal was unlikely to be approved by the government due to stringent antitrust rules.
Word of renewed negotiations first surfaced earlier this year, when Masayoshi Son – CEO of Sprint majority stakeholder SoftBank Group – gave signs that he may be willing to sell to T-Mobile.
If the union is successful this go round, it will reportedly be a stock-for-stock merger, with T-Mobile parent company Deutsche Telekom obtaining majority control. Son’s SoftBank Group, based in Japan, would take a sizable minority holder status out of the deal.
Should a merger deal be reached – and pass the Department of Justice antitrust regulations test – the consensus is that T-Mobile CEO John Legere would assume the helm. Not surprisingly, Son is expected to require some say in how the merged company is run as a condition of any potential deal.
According to CNBC a plan may not be finalized for weeks yet, if at all. Still, both companies saw a rise in stock price just after the news went public, with T-Mobile closing the day out +5.9% and Sprint +6.8%.
Even though Wall Street responded favorably when the news broke, there are still many unknowns. Sprint just underwent a drawn-out process trying to engineer a Charter Communications buyout. This appears to have fallen through due to Charter’s disinterest in being acquired.
Further, T-Mobile has yet to even begin due diligence activity, which can take months to complete. There are doubts surrounding antitrust regulations as well. Combining the third and fourth largest wireless communications companies is a major and complex move with no guarantee of approval.
Uncertainties aside, no matter what happens with this potential merger, pundits seem to agree that the effort is an attempt on both companies’ parts to bolster their struggling positions in the industry. Both wireless companies have long sought change, and both need a major coup to bring about enough change to tip the scales away from the top two providers, Verizon and AT&T.
Both T-Mobile and Sprint representatives have declined to comment thus far on details of the talks.