The persistent buzz regarding a potential tie-up between T-Mobile and Sprint was hushed late Monday following a report that the nation’s smallest major U.S. carrier is in exclusive talks with Charter Communications and Comcast to help the cable companies move into the wireless market.
The Wall Street Journal reported late Monday that Sprint Chairman Masayoshi Son struck a two-month, exclusive deal to hold discussions with Charter and Comcast through July focusing on potential partnership arrangements. One such deal could include the cable companies taking an equity stake in Sprint and investing in the carrier’s network, through which they could presumably launch a branded service.
Charter and Comcast announced plans in March to join forces to take on legacy wireless carriers. Both companies already have MVNO agreements in place with Verizon, but an alliance with Sprint could provide better terms, the Journal noted, citing unnamed “people familiar with the matter.”
Shares of Sprint jumped 4% in premarket trading Tuesday on the news; T-Mobile’s stock slid 3.5% before Tuesday’s opening bell.
While Sprint’s trove of 2.5 GHz spectrum is tremendously valuable, some analysts have questioned whether the carrier can fully leverage the airwaves given its precarious financial position. Sprint is gradually deploying service on those airwaves to increase capacity and accelerate network speeds, but the cash-strapped carrier may need to find a deep-pocketed partner in a market where new unlimited plans are spurring data consumption.
“We believe Sprint’s 2.5 GHz spectrum is more valuable than the current stock price is reflecting,” Jennifer Fritzsche of Wells Fargo Securities wrote in a note to investors this morning. “In our view, mid-band and high-band (north of 2.0 GHz spectrum becomes all the more relevant in a 5G world. Evidence of this is seen in the recent Straight Path sale…. If this article proves true, Sprint possibly has one more dance partner.”
Indeed, while a potential merger of T-Mobile and Sprint has drawn the most attention in recent months, many analysts say that marriage might not gain regulatory approval because it would consolidate the wireless market from four major carriers to three. As cable companies begin to move into the market, though, wireless carriers will have the opportunity to forge innovative partnerships, perhaps even with multiple players, as Sprint CEO Marcelo Claure noted last month.
“Now, at the same time, when you look at a different type of merger, potential cable companies, you look at the synergies, they’re quite similar,” Claure said at an investors conference in May. “And I think a lot of people don’t understand, but when you look at your business combined with one, two or three cable companies—as they seem to get together to do things—the synergies are enormous. There’s traditional operating synergies, but there’s also network synergies that are quite relevant when you’re going to build a 5G network in terms of infrastructure that cable companies have.”