T-Mobile US and Sprint are once again said to be in talks about an all-stock merger that would leave T-Mobile as the dominant shareholder in a new-look business.
Negotiators from T-Mobile US Inc. and Sprint Corp. (NYSE: S), as well as their respective owners Deutsche Telekom AG (NYSE: DT) and SoftBank Corp. , are actively working on the terms of a deal, although weeks away from finalizing it, according to a report from CNBC that cites people "close to the situation."
The possibility of a tie-up between T-Mobile, the country's third-biggest mobile operator, and Sprint, its number-four player, has become the longest-running "will they, won't they?" saga in the industry. (See Sprint Resumes Prelim Merger Talks With T-Mobile – Report, DT Wants Majority Stake in T-Mobile-Sprint Merger – Report and T-Mobile, Sprint Restart Merger Talks – Report.)
The operators are rumored to have held numerous rounds of talks about a merger or takeover as they try to bulk up and present a stronger challenge to market leaders AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ).
Concerned about the impact of a mega-merger on mobile competition, US regulatory authorities previously blocked a planned takeover of T-Mobile by Sprint.
Optimism has this year grown that a new administration, under the presidency of Donald Trump, will not oppose a tie-up, but reaching agreement on the precise terms of a deal could now be a major stumbling block.
According to CNBC's report, under the arrangements currently being discussed, T-Mobile would become the majority shareholder in the business, with CEO John Legere taking charge of the combined entity.
A complicating factor is that Masayoshi Son, the CEO of Sprint owner SoftBank, is reported to be demanding a say in how the business is run.
Given Son's reputation for hands-on involvement, that is no great surprise. But it could make the execution of any deal extremely awkward and might not augur well for T-Mobile's future prospects.
As things stand, T-Mobile owner Deutsche Telekom is bound to be concerned that hitching its dynamic US operation to the far more sluggish Sprint could bring an abrupt end to its growth story.
Through clever marketing and an efficiently managed investment strategy, T-Mobile has delivered successive quarters of growth in customer numbers and earnings for Deutsche Telekom, becoming the only part of the German telco's business reporting meaningful improvements in sales. (See DT Gets Familiar Earnings Boost From US Biz.)
But in the wake of a merger, senior executives would be forced to concentrate on integrating Sprint's network and business with T-Mobile's -- an effort that could hinder any marketing activities and slow down the pace of innovation.
If Son takes an active interest in the running of the business, Legere could also find he is trying to please different shareholders and has less management freedom than he previously seems to have enjoyed.
Because any merger would reduce competition, and potentially lead to an increase in prices, it is likely to be welcomed by AT&T and Verizon, the very players that T-Mobile and Sprint believe they can rein in following a deal.
Executives from the market leaders may relish any news about the difficulties of executing a deal or making it work in practice.
Financial markets are taking the latest reports seriously: T-Mobile's share price closed up 5.74% on the Nasdaq on September 19, after CNBC's story appeared, while Sprint's was up 6.8% on the New York Stock Exchange.
— Iain Morris, News Editor, Light Reading