Report: Sprint, T-Mobile merger talks crank up again, as SoftBank hints that a deal looms

merger and acquisition
A Sprint-T-Mobile merger could get the green light under the current administration.

The on-again, off-again saga of Sprint and T-Mobile's courtship dance has a new chapter, as Sprint parent SoftBank indicates that an integration deal could be close.

The two mobile companies have reportedly re-started their talks, which go back years, under the auspices of SoftBank CEO Masayoshi Son, who is looking to shore up his American wireless venture.

Bloomberg cited people familiar with the matter in reporting that Sprint and Deutsche Telekom-owned T-Mobile see a mutual benefit in sizing up by tying up—the two combined still have fewer subscribers than either AT&T or Verizon Wireless, but their ability to meet the fierce competition in the U.S. wireless market would be greatly magnified with additional scale.

“From SoftBank’s perspective, if they get the T-Mobile deal done, that’s probably enough for a while,” Dan Baker, an analyst at Morningstar Investment Management Asia, told the outlet. “The benefit is clearly that the competition reduces—they get a business that has enough scale to compete with other big players.”

That said, the structure of the deal could be a sticking point for negotiations. Rather than broker an outright acquisition, Son would like to see SoftBank form a new holding company that would have a controlling interest in a combined entity consisting of Sprint and an integration partner, according to the New York Times. This is reportedly the blueprint that Son first brought to Charter Communications in hopes of a merger, despite the fact that Sprint’s market value, at $34 billion, is only a third of the $99 billion that Charter commands.  

The No. 2 U.S. cable operator didn’t put too fine a point on the ownership issue in rejecting the overtures: Any tie-up would mean Charter buying Sprint, and Charter isn’t biting. “We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint," a Charter spokesman said in a media statement last week.

Son reportedly approached Comcast as well, with similar results.

For its part, neither DT, T-Mobile nor sources within their orbit have made a statement on the talks with Sprint. But Son shows no signs of discouragement. He said during the company's fiscal first quarter earnings call that “Sprint’s earnings are improving as planned and the company could conceivably go it alone. But, in order for the company to grow further, we are considering multiple consolidation options. The negotiations are proceeding apace and we should be able to arrive at a decision soon.”

SoftBank took control of the wireless carrier in 2013, as the company struggled with profitability and dwindling market share—woes that have continued as the carrier has hemorrhaged subscribers and finances. It also has continued to refinance its debt commitments, which are again coming due soon. Even so, Sprint is changing up its strategy, and last week it reported a profit for the first time in three years, while SoftBank on Monday took the wraps off better-than-expected earnings for the quarter, partially due to Sprint’s rebound.

A Sprint-T-Mobile merger was rejected by regulators in 2014 under the Obama administration, but the Ajit Pai-led FCC under Trump has indicated that it would be friendlier to mega-mergers than its previous iteration.