T-Mobile, Sprint call off merger talks

T-Mobile CEO John Legere (T-Mobile)
T-Mobile CEO John Legere

The highly anticipated merger of T-Mobile and Sprint is dead. For now, at least.

The parent companies of both carriers had been in negotiations for months to merge in a move that would dramatically change the U.S. wireless industry, resulting in a market with three players of roughly the same size. But both carriers issued curt statements Saturday saying negotiations between the two companies had been called off.

“The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders,” T-Mobile CEO John Legere said in a prepared statement. “However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record.”

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Sprint issued a similar announcement, with CEO Marcelo Claure saying “we have agreed that it is best to move forward on our own.”

Reports surfaced early last week that Sprint parent SoftBank had planned to end talks with Deutsche Telekom, which controls T-Mobile, due to concerns about handing over control of the combined carrier to T-Mobile. Instead, Sprint was reportedly considering investing heavily in upgrading its network to better compete against its bigger rivals.

Sprint also recently reportedly reopened talks with Charter Communications about forming a wireless partnership.

Failing to ink a deal between the nation’s two smallest major wireless carriers would be costly, though, New Street Research said last week.

“(I)f these management teams fail to get this deal across the goal line, they have failed to do their job,” New Street wrote. “They will be walking away from close to $50 billion in value. Regardless of what either side thinks their asset is worth on its own, adding $50 billion to that starting value would be a big enough increase in value that they ought to have found a way to get the deal done.”

Whether Sprint can thrive in a U.S. wireless market that has grown more competitive in recent quarters is unclear. The nation’s fourth-largest carrier has compiled an extremely valuable portfolio of spectrum; it has grown its market share in recent quarters through aggressive promotions; and it continues to cut costs in major ways. But the operator is still billions of dollars in debt, much of which will come due over the next few years, and questions remain regarding its ability to finance a network build-out to leverage its valuable airwaves.