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Sprint and T-Mobile are talking about a mega mobile merger

by Peter A. McKay
Sep 22 2017, 4:07pm

U.S. consumers’ choice of four major mobile carriers might soon shrink to just three.

After months of negotiations, T-Mobile and Sprint are nearing agreement on a merger that would create a single carrier with 130 million subscribers, according to a Reuters report on Friday that boosted the stocks of both companies. Sprint shares leapt almost 6 percent, and T-Mobile’s parent, Germany-based Deutsche Telekom, edged up nearly 1 in European trading.

A potential merger would face antitrust scrutiny, but the two companies, who have long talked about combining forces against AT&T and Verizon, may be betting the legal hurdles will be easier to clear under a Republican administration and Congress.

The carriers are also apt to argue that even though there aren’t many of them in the U.S., they are nevertheless engaged in a robust competition that’s benefited consumers. The Big Four have been in a heated price war since 2013, when T-Mobile eliminated two-year contracts and moved to a month-to-month fee structure that at the time was cheaper for many users.

T-Mobile’s aggressiveness has undoubtedly helped it add subscribers, including an industry-leading 851,000 net additional signups in the first quarter of this year, according to Bloomberg. But the broader price war has clearly hampered profits and the carriers’ share prices over the longer haul.

Friday’s rally pushed Sprint barely into positive territory for 2017 so far, up 0.4 percent for the year to date, as the closing bell approached. Meanwhile, shares in Verizon, AT&T, and Deutsche Telekom are all still down for the year.

Other details to watch:

  • Reuters reported that T-Mobile’s flamboyant chief executive John Legere is likely to head the combined company, if a merger can be completed with Sprint. He’s sometimes been known to drop f-bombs and engage in Trumpian flame wars on Twitter while trash-talking rival carriers.
  • Even with 130 million subscribers, a combined Sprint/T-Mobile would still likely be in third place in the U.S. behind Verizon, at 143 million, and AT&T, at 132 million as of the second quarter, according to the industry news site FierceWireless. But the combined company would obviously be a much more robust competitor.
  • T-Mobile parent Deutsche Telekom would likely be the majority owner of a post-merger company, Reuters reported. But Sprint’s largest shareholder, Japan’s SoftBank Group, would likely have a significant minority stake as well, underscoring its increasing importance in the technology world.
  • SoftBank is also reportedly close to making a venture investment in Uber, and its founder Masayoshi Son has met with President Trump to discuss increased investment and job creation in the U.S. tech sector.

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