Sprint’s CEO said that his company is open to a major transaction with either another wireless company or with a group of cable companies. And he said either transaction would likely result in “enormous synergies.”
Speaking at the JP Morgan investor event this week, Sprint’s Marcelo Claure said that his company enjoys the backing of parent company SoftBank, which means that “we look at deals very differently. Consolidation is not a must for us as it is for a lot of other partners.”
However, Claure said that he sees significant opportunism to merge either with a company like T-Mobile or with U.S. cable companies. “We feel very good on the future for Sprint. However, when you look at the potential opportunities, doing a deal with another carrier, like the usual suspect, when you look at what can be done, it’s pretty amazing when you think about it,” he said.
Although Claure didn’t name T-Mobile specifically, he hinted that a merger between Sprint and T-Mobile would create a significant competitive player. “Having a company almost the size of AT&T and Verizon, in which you combine the two mavericks and you create a turbocharged maverick that will continue to fight for consumers, but now with a different scale, the synergies are pretty interesting,” he said.
But Claure also addressed the possibility of a transaction between Sprint and one or more cable companies. “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. And I think a lot of people don’t understand, but when you look at your business combined with one, or 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.”
Claure’s comments are likely in part a reaction to the announcement by Comcast and Charter earlier this month that they will join forces as they take on the four major carriers in an extremely competitive U.S. wireless market. “By working with the team at Comcast, we can not only speed Charter’s entry into the marketplace, it will also enable us to provide more competition and drive costs down for consumers at a similar national scale as current wireless operators,” Charter CEO Tom Rutledge explained in a press release announcing the news.
But Claure isn’t the only top wireless executive openly speculating on a merger between Sprint and T-Mobile, or between one of those companies and Comcast and Charter. Just hours before Claure’s appearance at JP Morgan, T-Mobile’s CFO outlined some of the benefits he sees in a merger between Sprint and T-Mobile. “One of the benefits of a Sprint transaction would be a combination and rationalization of two networks in one,” T-Mobile CFO Braxton Carter said of combining T-Mobile’s network with Sprint’s network, including Sprint’s copious 2.5 GHz spectrum holdings. “You combine the two networks to have tremendous density. And then put the 2.5 [GHz], and what that could do to you for 5G is massive future capex avoidance as this develops, and significant differentiation against the competition.”
Carter, speaking at the JP Morgan event, also obliquely addressed the teaming between Comcast and Charter, noting that “I believe that that type of coalition [between Comcast and Charter] actually makes, eventually, more industrial sense for cable and wireless to come together to truly disrupt what is happening in the U.S. marketplace.”
M&A speculation in the telecom industry has reached a fevered pitch following the close of the FCC’s 600 MHz incentive spectrum auction of TV broadcasters’ unwanted licenses. Coupled with what would likely be a receptive Justice Department, many analysts are expecting a merger between Sprint and T-Mobile, along with other possible combinations.
Apart from his comments about T-Mobile and Comcast and Charter, Claure also hinted that Sprint may eventually need to raise its wireless service prices as traffic on its network continues to double every 18 months. “In order for this industry to be healthy, I think eventually all carriers will have to basically increase prices in the next few years as their consumption increases,” he said.
Claure also discussed Sprint’s efforts to improve its network and its prepaid offerings, explaining that the carrier continues to improve its network and that it expects to improve its prepaid service portfolio in the face of increased competition.