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If Sprint, T-Mobile Divest Customers in a Merger, They Could Call América Móvil

Mike Dano
4/30/2019

América Móvil said it would consider purchasing US subscribers divested from the merger of Sprint and T-Mobile. However, several puzzle pieces would need to fall into place before that kind of transaction could happen.

"That would be good, and we're open to think about it," Daniel Haji, the CEO of the Mexico City-based carrier, said during the company's quarterly earnings conference call. According to BTIG analyst Walter Piecyk, Haji was responding to a question about whether the company would be interested in buying assets potentially divested by Sprint and T-Mobile. Haji said the company would be interested in purchasing subscribers from a divestment, but not network assets like spectrum or cell tower equipment.

Haji's comment is essentially a response to recent reports that the Department of Justice won't accept the merger of Sprint and T-Mobile as it is currently structured. That could well lead the companies to restructure their merger proposal to include conditions or divestitures including the sale of their prepaid customers. Sprint currently operates the Boost and Virgin Mobile prepaid brands and counts around 8.8 million prepaid customers, while T-Mobile operates the Metro by T-Mobile prepaid brand and counts roughly 18 million customers.

The analysts at Wall Street research firm Raymond James said Sprint and T-Mobile likely would divest Sprint's Boost prepaid operation. The analysts wrote in a note to investors that América Móvil "is open to see what alternatives might become available from the TMUS/S merger (i.e., buying the Boost prepaid brand) if divestitures are required as a condition of merger approval."

However, for that transaction to happen, first Sprint and T-Mobile would need to agree to amend their merger agreement -- a situation neither company has said it's interested in pursuing. And then América Móvil would have to purchase those divested customers through some kind of transaction.

Such a move by América Móvil has precedent: The company previously purchased US MVNOs Simple Mobile and Page Plus Cellular. América Móvil is the largest MVNO in the US with around 21.6 million customers; its MVNO brands include Tracfone and Straight Talk.

All this jockeying around prepaid is noteworthy considering T-Mobile just today confirmed a management restructuring that includes the departure of Tom Keys, the executive who has led T-Mobile's prepaid business since the company purchased prepaid company MetroPCS in 2013. As first noted by GeekWire and subsequently confirmed by the operator, T-Mobile's longtime prepaid executive Keys is stepping down and turning over leadership of Metro by T-Mobile to T-Mobile retail chief Jon Freier. Keys is retiring but T-Mobile said he will continue to work as an advisor focusing on the prepaid aspects of the Sprint merger.

And all of these new developments come amid a growing consensus that T-Mobile's proposed merger with Sprint is facing serious obstacles.

T-Mobile CEO John Legere said last week that he was confident the merger between Sprint and T-Mobile would be approved by the end of June. However, two days after Legere made his comments, Sprint and T-Mobile extended their deadline for completing the deal to July 29.

Then, two days after that, the head of the Justice Department's antitrust division said he has not yet decided on the transaction. "I have not made up my mind," Makan Delrahim said in an interview with CNBC. "The investigation continues."

Partly as a result of all these developments, Raymond James lowered its odds on the Sprint-T-Mobile merger as it is currently structured from 80% to 55%.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

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