T-Mobile/Sprint tie-up is far from certain under Trump: Cowen and Co.

Donald Trump
President-elect Donald Trump

Shares of both T-Mobile and Sprint have climbed in recent weeks due in part to speculation that a tie-up between the carriers will be more likely under a Donald Trump administration than it was under President Obama. But a merger between the two carriers is still far from certain, according to Cowen and Company Equity Research.

Potential consolidation among the nation’s two smaller major wireless operators has created a significant amount of buzz in the wireless industry for years, of course. SoftBank spent more than $20 billion to acquire controlling interest in Sprint in 2012, and the Japanese company had initially hoped to acquire T-Mobile as well and merge the carriers to take on Verizon and AT&T, SoftBank CEO Masayoshi Son noted earlier this month. That effort was dropped when U.S. regulators indicated they were opposed to a merger, however.

Meanwhile, T-Mobile continues to gain momentum in a competitive market where growth has nearly stalled, increasing its attractiveness as a target for acquisition. The nation’s third-largest operator is “very interested” in exploring strategic opportunities, COO Mike Sievert told Reuters a few weeks ago. Deutsche Telekom has long looked to offload its U.S. carrier, but earlier this year shelved those efforts to focus on the incentive auction.

Investors appear to be betting that consolidation in wireless will be more likely under Trump, and the two FCC advisers the incoming president made last week may signal a far lighter regulatory touch than Obama’s administration employed. Trump has vowed to block AT&T’s proposed acquisition of Time Warner, but there’s little evidence suggesting how Trump would view consolidation among wireless operators, Cowen and Company wrote in a research note to investors.

“According to Cowen TMT (technology, media and communications) Policy Analyst Paul Gallant, early signs (the Trump FCC transition appointees) indicate benefits to cable/telcos, ISPs, and media companies via less regulation,” the firm wrote. “But it is also possible Trump’s previous lack of TMT policy positions, populism, and lack of Department of Justice clarity inject a degree of uncertainty including M&A as we think about AT/Time Warner and Sprint/T-Mobile.”

Gallant pegged the chance of regulatory approval of a deal under a Trump administration at 50%, but said the likelihood of such a move was higher late in 2013 when SoftBank made a run at T-Mobile. Deutsche Telekom may no longer be as eager to spin off its thriving U.S. carrier as it once was, and T-Mobile’s price tag is sure to be more expensive than it was three years ago. And a cable operator such as Comcast may see T-Mobile as a way to buy its way into a competitive U.S. wireless market.

Regardless, any major mergers or acquisitions aren’t likely to emerge until a Trump administration is firmly in place.

“We really won’t know Trump’s temperament towards such a deal until he appoints a new head to the FCC and DOJ, which means such a deal wouldn’t be proposed until at the earliest 2H17,” Cowen wrote.