Sprint Calls Off Talks With T-Mobile ; Merger No More
After months of negotiation, U.S. wireless provider Sprint Corp. is preparing to drop agreements to merge with T-Mobile US Inc., a fellow U.S. carrier, for the second time in three years. The two companies had been working on a deal that would bring together their subscribers and subsequently create a competitor large enough to challenge other telecommunications and media market leaders.
However, at a meeting in Tokyo last week, directors of Sprint’s parent company, SoftBank Group Corp. decided to hold off on merger efforts, catching T-Mobile’s executives off guard. According to people familiar with the negotiations, SoftBank founder and chairman Masayoshi Son is worried about giving up too much control should the two carriers merge.
On Monday, Japanese newspaper Nikkei reported the break in transaction between Sprint and T-Mobile. During Monday afternoon trading, Sprint shares fell by 9% to $6.34, and T-Mobile shares dropped by 5.4% to $59.58. Shares of carrier competitors Verizon Communications Inc. and AT&T Inc. declined as well, as investors were hoping that the potential merger would have decreased competitive pressures.
The last time Sprint and T-Mobile discussed a potential merger was in 2014, when Sprint was looking to acquire T-Mobile but forfeited the plan after realizing that regulators would be opposed to the merger.
In the current deal, T-Mobile Chief Executive John Legere would have been the one to run the combined firms. In addition, T-Mobile’s parent company Deutsche Telekom planned to maintain control so that it could include U.S. earnings in its reports. However, SoftBank felt that handing over so much power would be unwise. Mr. Son wanted to maintain some level of influence over Sprint.
Sprint has now chosen to invest in its network after dropping the merge. Analysts say that the company has spent far less on its network than its rivals have.
After merger negotiations between the two wireless providers fell through in 2014, T-Mobile has increased its number of subscribers and overtaken Sprint’s position as the third largest U.S. carrier. In contrast, Sprint is struggling to gain profit, and “needs this merger so much more than T-Mobile does,” said Recon Analytics Inc. researcher Roger Entner.