According to a report recently published by the Nikkei Asian Review, it appears that SoftBank, the parent company of Sprint, is planning to cease merger talks with Deutsche Telekom, the parent company of T-Mobile, at least for now. The last few months have seen Sprint and T-Mobile initiate talks with regards to a proposed merger of the two carriers, in the hope of going toe to toe with industry leaders Verizon Wireless and AT&T, and as recently as three weeks ago, it was reported that the parties involved were in the process of finalizing the deal.
The news has since been covered by other organizations, with the Wall Street Journal reporting that the board of directors of SoftBank have convened a meeting in Japan last weekend. SoftBank is said to be having second thoughts about ceding control to T-Mobile and its parent company Deutsche Telekom. What Sprint will be doing instead of pushing through with a merger with T-Mobile is make some significant investments in improving its network.
When the news of the collapse of the merger talks broke, Sprint’s shares went down about 9 percent by late Monday, while T-Mobile’s shares dipped over 5 percent. As pointed out by Wells Fargo Securities, the news also allowed the shares of publicly traded tower companies to go up over 3 percent.
It bears noting that SoftBank’s plan to halt merger talks may just be a negotiating strategy, and perhaps given enough time, a merger between the third and fourth biggest wireless carriers in the United States could still happen eventually. Many may wonder though if Sprint can afford to play hard to get (so to speak). It is no secret that the mobile operator still has payables worth billions of dollars, and a number of these debts will become due in the years to come.
Still, Sprint has an incredibly rich portfolio of spectrum (which makes it an attractive target for Deutsche Telekom and T-Mobile), and to the company’s credit, the combination of effective cost cutting practices and aggressive promotions has actually allowed the carrier to improve its market share in the last few quarters. During the recently concluded third quarter alone, Wells Fargo reported that Sprint was able to register a 10 percent improvement in terms of the number of postpaid total gross additions (the best growth rate among the Big Four carriers in Q3 2017). Also, as the industry begins to transition to the 5G era, Sprint’s wealth of spectrum will prove to be a huge advantage over the rest of the competition.
