Report: Sprint, T-Mobile Start Informal Merger Talks

Bloomberg says shackles off after spectrum auction close

T-Mobile and Sprint, the third and fourth largest wireless carriers in the country, are holding informal talks about a possible merger, according to a Bloomberg report, a deal that could create more formidable competition to industry leaders Verizon and AT&T.

Sprint and T-Mobile have been down the merger path before – they scrapped talks in 2014 after the Federal Communications Commission said it would likely block a merger that would reduce the number of wireless competitors. But those shackles could be off in the new presidential administration, which is expected to be friendlier to big deals.

Both Sprint and T-Mobile are vastly different companies than they were in 2014. T-Mobile, controlled by German phone company Deutsche Telekom, has invested heavily in its network since the 2014 Sprint deal fell through, growing its subscriber base and its market cap. T-Mobile’s market cap has grown to about $55 billion, compared to Sprint at $32 billion. T-Mobile has been aggressively acquiring customers through unlimited data plans and low-cost services package, adding about 1 million customers per quarter for the past four years. Sprint, which has the lowest rates in the industry, has struggled to grow its customer base.

The talks start just as the prohibition of participants in the recently completed federal spectrum auction from discussing deals has been lifted. That anti-collusion measure expired when the auction ended April 27.

According to Bloomberg, officials at Sprint have met informally with Deutsche Telekom executives about a transaction. No bankers have been hired, Bloomberg reported, but financial players are expected to compete for roles should any deal move forward. 

Investors seemed to take the report in stride. Sprint stock was up as much as 3.3% (26 cents each) to $8.13 per share in Friday trading, but settled down later in the day to $7.93 per share, up 6 cents each or 0.7%. T-Mobile shares were up as much as 1.6% ($1.06 each) to $66.87, but settled down to $65.35 in afternoon trading Friday, down 46 cents or 0.7%.