According to a very recent report released by CNBC, the parent companies of major US wireless carriers T-Mobile and Sprint are in active talks regarding a potential merger. T-Mobile parent Deutsche Telecom is said to be engaging in discussions with Sprint parent SoftBank about the possibility of effecting a stock for stock agreement that would have the former become the majority owner of the resulting combined business entity. Just to be clear, there is no final decision yet, and if ever a definite agreement will be reached, it will likely take several weeks to get there.
For several years now, T-Mobile and Sprint have been exploring ways in which to better compete with the industry leaders, Verizon Wireless and AT&T. While the third and fourth biggest mobile operators in the country have since taken great strides to expand their respective customer bases, they are still a long way from equaling the duopoly’s massive reach.
A merger, however, could significantly change things. And recent developments, like the ascension of Donald Trump in the White House, and the results of the Federal Communications Commission’s incentive auction a few months ago, has helped increase the potential for T-Mobile and Sprint combining forces to take on Verizon Wireless and AT&T.
Interestingly, when SoftBank completed its acquisition of Sprint about half a decade ago, it was actually also looking to purchase T-Mobile, too. But regulators under then President Barack Obama’s administration had opposed the tie up. With a new President and a new administration, however, talks of a merger have once again grabbed some headlines, but this time around, it is T-Mobile’s camp that looks to be taking the buyer’s role.
It is not surprising why T-Mobile would want to merge with Sprint. Among the Big Four carriers in the United States, Sprint may only be number four, but it does possess a considerable wealth of 2.5 GigaHertz spectrum. It is no secret that T-Mobile wants to get its hands on that spectrum, especially after acquiring lots of 600 MegaHertz it had won from the FCC’s incentive auction. As for Sprint, despite its impressive spectrum holdings, it could use some capital to take care of its debits, which will become due.
Apart from its talks with T-Mobile, Sprint has also engaged in discussions with cable giants Charter and Comcast (the two companies are negotiating as one party) back in June earlier this year regarding potential partnership agreements in the future.
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