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T-Mobile & Sprint Shares Spike As Merger Prospects Brighten

Deadline logo Deadline 2/17/2017 David Lieberman
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The prospect of a merger between T-Mobile and Sprint — the respective No. 3 and 4 wireless providers — looks more likely this afternoon: Both companies’ shares spiked after Reuters reported that Sprint owner SoftBank Group is willing to relinquish control to T-Mobile US, which is controlled by Deutsche Telekom.

T-Mobile is up 4.4% and Sprint more than 3% following the report.

The wire service notes that the companies aren’t engaged in deal talks yet. The FCC bars them from collusion while they’re engaged in its airwave spectrum auction. That’s expected to end in April.

Deutsche Telekom CEO Tim Hoettges told investors in November that he’s “not in the mood of selling” T-Mobile, a change from the company’s previous stance.

T-Mobile has a market value of $50 billion, while Sprint’s at $36.6 billion.

Analysts have anticipated some kind of deal as T-Mobile and Sprint try to keep pace with their larger rivals AT&T and Verizon. Dish Network, which owns terrestrial spectrum as well as the No. 2 satellite service, also could play in any M&A talks.

But T-Mobile’s colorfully outspoken CEO John Legere — who frequently uses Twitter to jab what he has called a “stupid, broken, arrogant industry” — seems to have the upper hand after years of effort to simplify the service and its pricing. Among other things, the company eliminated service contracts and provides unlimited streaming for some music and video services.

As a result, it has added at least 1 million subscribers in each of the last 15 quarters, ending 2016 with 71.5 million.

Sprint hasn’t fared as well. It added 577,000 customers in the last three months of 2016, for a total of 59.5 million.

Both companies’ stocks have soared, though, as investors sensed that they might be bought or merged. T-Mobile is up more than 72% over the last 12 months, and Sprint’s up nearly 214%. Both took off after the election; analysts figured that the Trump administration would have few antitrust objections to a merger, even though it would reduce the number of wireless carriers from four to three.

Still, MoffettNathanson Research’s Craig Moffett said last month that T-Mobile “has no incentive to rush to the altar” with Sprint at its high market valuation.

The rising stock prices also could work against them with regulators: A merger “would be greeted far more warmly in Washington if it were positioned as a lifeline for what would otherwise be a failing firm,” Moffett said.

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