In the world of telecoms, it seems that there are some things that never end. In the US, the prospect of a marriage between the mobile operators, T-Mobile and Sprint, regularly makes headlines. According to the Wall Street Journal, discussions have recently resumed between these two players, respectively number three and four of the market, behind the unstoppable tandem formed by the giants Verizon and AT&T.
According to the business daily quoting sources familiar with the matter, the negotiations are “at a preliminary stage”.
With all the failures of mergers that they faced in the past, we understand that the two boards are cautious …
As a reminder, the two actors had once again attempted to join forces late last year. But they failed to reach an agreement, ending their talks in early November. However, the door was mutually left open for new discussions.
“Even though we have not found an agreement to merge our companies, we recognize the interest of a potential merger,” said Marcelo Claure, Sprint’s CEO and board member of the parent company, SoftBank Group Corp.
Tim Höttges, the CEO of Deutsche Telekom, the parent company of T-Mobile US, had also restrained himself from closing the door definitively: “We have always said that – under good conditions – a merger of T-Mobile US with another company could bring additional benefits to customers and the prospect of increased shareholder value,” he said. “These conditions could not be met in this case.”
From the business standpoint, such a deal would create value, and allow the new entity to release additional resources for investment in its networks. Advancements in infrastructure are considered critical factors in order to remain competitive in the American market.
“To cover a country as vast as the United States in 4G – or tomorrow in 5G – requires very substantial and long-term investments. It’s not as fast as rolling out these services in Belgium or the Netherlands,” one analyst said.
By pooling their strengths, T-Mobile and Sprint would capture about 30% market share, close to their rivals Verizon (36%) and AT&T (33%). They would also benefit from a greater investment capacity in 5G, a niche where Verizon and AT&T are currently applying significant resources in order to outdo their competitors.
Are the current negotiations more likely to succeed than the previous ones? Perhaps. If the Obama administration vetoed such a marriage nearly three years ago, the coming to power of Donald Trump, who favors deregulation, suggests that a deal may now be possible. In addition, Masayoshi Son, the CEO of SoftBank, Sprint’s parent company, who has been campaigning for years for a union with T-Mobile, has done everything possible to attract the good graces of the current White House tenant. In a December 2016 meeting with Donald Trump, Son pledged some $50 billion in investments in the US, aiming to create 50,000 jobs. Now, let’s see what the future will bring…