T-Mobile/Sprint confirmation could happen in a matter of weeks after deal is announced: Barclays

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A tie-up between T-Mobile and Sprint could get a green light more quickly than expected.

A tie-up between T-Mobile and Sprint wouldn’t be rubber stamped by federal regulators, Barclays analysts wrote this morning, but the timing may never be better. And confirmation could happen within weeks after any deal is announced.

Merger talks between the nation’s No. 3 and 4 wireless network operators have gone on for weeks, and one report last week had the carriers reaching “a major breakthrough” in negotiations. That breakthrough may have been Sprint’s willingness to accept a stock-for-stock merger that values Sprint at or near its current price, according to a separate report that emerged Friday night.

Sprint’s market capitalization at the time was $34 billion, but shares of the company fell more than 7% as the market opened Monday, apparently on investors’ disappointment that the deal wouldn’t bring a higher valuation.

The news appears to mark the latest sign of progress in active merger talks, however. And just as a deal seems more likely than ever, regulatory approval—though no slam dunk—might be more plausible than previously thought.

“While this is not the first time we have heard that the two carriers are in discussions, the pace of reported developments (if correct) seems to suggest that both companies may be getting close to decision time on whether it makes sense to move forward with a transaction,” Amir Rozwadowski of Barclays wrote in a note to investors this morning. “By no means is the regulatory approval of such a deal guaranteed. However, in our view, now could provide the best window of opportunity to take a shot at getting what would be a financially and strategically viable transaction done.”

Speculation of a merger between the two U.S. wireless operators has heated up throughout the year, due to both the end of the quiet period following the incentive auction of 600 MHz airwaves and the likelihood of a lighter regulatory stance of Donald Trump’s administration compared to the Obama White House. Indeed, Sprint parent SoftBank had tried to acquire T-Mobile and merge the carriers several years ago but dropped the effort after getting significant push-back from federal regulators.

Regulators are still sure to be wary of any deal that consolidates the current wireless market from four major carriers down to three, and at least one key Trump nominee—Makan Delrahim, who is set to become the assistant attorney general for antitrust in the U.S. Department of Justice—has yet to be confirmed. Regardless, a merger could gain approval within weeks after a deal is announced, according to Barclays.

“In other words, we still believe that the regulatory approval of a potential merger between T-Mobile and Sprint is not a layup,” Rozwadowski wrote. “However, prevailing industry dynamics, a potentially more lenient regulatory environment, and a reported willingness to be flexible in terms of ownership/deal structure lead us to believe that now could provide the best window of opportunity for a deal to materialize. While we continue to believe prudence would suggest waiting for the Antitrust AAG to be in place, our best estimate suggests that a conformation could happen in a manner of weeks.”