The M&A passions grew more heated this morning as T-Mobile executives spoke openly about the benefits of a tie-up with Sprint.
But T-Mobile made clear that it would consider an open relationship as well.
“It’s not a question of will talks happen; of course they’ll happen,” T-Mobile CFO Braxton Carter said during an investors conference this morning. “There’s a huge prize when you talk about Sprint, and that’s true, hard synergies.”
Speculation of a merger between the two U.S. wireless operators has continued to heat up in recent weeks, 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. The parent companies of both carriers made eyes at each other across the dance floor last week.
SoftBank spent more than $20 billion to acquire Sprint in 2012, and the company had hoped to acquire T-Mobile as well, merging the carriers to take on Verizon and AT&T. That effort was dropped when U.S. regulators indicated they were opposed to a merger, however.
And Carter made no secret of the attractiveness of Sprint’s significant chunk of 2.5 GHz spectrum, which appears to have become much more valuable as carriers plot their transitions to 5G. While those airwaves don’t propagate as well as lower bands, they can significantly increase capacity.
Some analysts have questioned whether Sprint can fully leverage that spectrum given its precarious financial position. But Carter suggested a merger could put those airwaves to use much more quickly.
“Sprint has a treasure trove of 2.5 spectrum,” he continued. “Granted, not all of it’s the same; part of it has a little bit of hair on it. But that is still a treasure trove that you could do amazing things with. And the synergy comes from putting these two networks together, and having the densification necessary to ubiquitously deploy that 2.5. Sprint’s doing that city by city now. And that will take them a decade with that type of strategy.”
T-Mobile has said consistently that it doesn’t feel a sense of urgency to join forces with Sprint, a cable operator or anyone else given its healthy financial state. The carrier has consistently added wireless subscribers over the last three years, and—unlike some of its competitors—its bottom line appears to be solid.
And that gives the carrier the luxury of finding an ideal partner, COO Mike Sievert said.
“Could there be an advantage by turbocharging (the) position we have in the market with increased capabilities from a potential partner or by acquiring or by combining in some way? Absolutely,” Sievert stated. “But we’ll only pursue that if when we do all the work—and, you know, the movie’s still playing out—it looks like there’s an opportunity to enhance shareholder value on top of a business that’s performing well.”
And while Sprint may be T-Mobile’s most obvious potential dance partner, it certainly isn’t the only one. T-Mobile could merge with another player, Carter said, or with multiple companies looking to take on Verizon and AT&T in wireless.
“I think cable – it’s a little bit early, that’s going to develop; they’re going to kick the tires,” Carter observed. “But what about Sprint, T-Mobile and a coalition of Comcast and Charter, and the value creation that could come out of that?”