Active Merger Talks with T-Mobile and Sprint

T-Mobile and Sprint were said to have resumed talks on Tuesday morning, September 19, discussing an all-stock deal that would guarantee T-Mobile a majority stake in the merged company. 

Deutsche Telekom and Softbank, the parent companies, have had a few exchanges about stock-to-stock merger where T-Mobile’s holding company would arise as the majority owner.

Over the years since Softbank took charge of Sprint, T-Mobile and Sprint have seemingly been liaisons and earlier this year, Masayoshi Son, Softbank’s founder and current CEO, expressed a willingness to sell Sprint to T-mobile. 

The desire of Son to have a say in how the company will be ran would add another complex factor to an already difficult transaction, as John Legere, T-Mobile’s CEO, is expected to lead any collaboration that results from a merger.

The companies refused to release a statement regarding the finalization of their agreement and have not yet set an exchange ratio for a deal, but are currently discussing details of a term sheet.

The risk of rejection by the Department of Justice would greatly influence the final decision of both sides as to whether they will proceed with the deal, but the biggest issue is whether any merger between the wireless carrier giants would be approved by antitrust regulators.

The Merger’s Consumer Cost

The company’s merger would likely to provoke industry wide change that will not only affect their customers, but would result in changes with various carriers across the country, analysts say.

“It would be devastating for consumers in the long run,” said news editor Chris Mills.

The option for a low-cost plan would unlikely remain if the number of major carriers were to be reduced to three. “You’ll end up with three great carriers with expensive data plans,” Mills said, giving an example like Canada.

As evidenced by the coverage maps which were put together by an analytics firm, Sprint customers would more likely see a boost in network coverage. A merged company might also give Sprint the means to build out its number of Spectrum licenses that it’s not using, but since both companies power their 2G networks differently, consumers might need to change their phones.

There’s a possibility that regulators wouldn’t be in agreement with the merger, said an industry analyst, pointing out a similar deal between AT&T and T-Mobile in 2011 wasn’t pursued. However, a telecom merger is looking more favorable with the current  regulatory body indicating that it would roll back some of the stricter rules of FCC’s previous administration.