T-Mobile and Sprint have had on-again, off-again merger talks for some time now and Reuters report that it may soon come to a conclusion. The two companies considered combining forces three years ago, but the attempt to merge was abandoned due to regulatory issues. Now, both carriers are getting further along in this dialogue and may be close to sealing an agreement on tentative terms.
What's the deal?
T-Mobile and Sprint are listed among the top 5 wireless providers in the United States. In recent years, the competitive industry placed them in active sparring on who would capture a larger market share.
Now, they might join forces to achieve just that. According to the news source, the discussions involve Sprint, Sprint's owner Softbank, T-Mobile, and T-Mobile's parent company Deutsche Telekom.
The report further states that should the consolidation happen, the majority of the merger will be owned by Deutsche Telekom while Softbank will get a large minority stake. Reuters added that T-Mobile CEO John Legere will be leading the combined company. However, Softbank founder and CEO Masayoshi Son also reiterated that he wants to have a say on how the company will be run.
Picking up from where they left off
The initial plans on merging years ago were abandoned because of the Federal Communications Commission (FCC) policy on market consolidations.
At the time, the Obama administration had restrictions on industry consolidation and both Sprint and T-Mobile were quick to anticipate a rejection. Now, with the FCC under Trump's governance, there is more room for more market share caps.
There is some significant difference between the two merger plans. The current terms seem like a big flip from what they intended years ago.
At the time, T-Mobile was struggling and it was Sprint who wanted to absorb the then-tinier carrier. Since then, T-Mobile has been aggressive in its promotions and has moved up the ranks alongside Verizon and AT&T. With its progress in the business, it has become one of Sprint's most interested suitors.
Why does it matter?
Should both companies pursue the merger, the consolidated group will have over 130 million subscribers.
This will clearly put them right below AT&T's 135 million and Verizon's 146 million customers. The possible union could upgrade the scale and potential for cost-cutting as well as investment increase in areas such as 5G. The deal clearly makes sense in the financial logic aspect and the two parties made a good move in trying.
