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Sprint, T-Mobile Close to Merging … Or Not

M&A

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from August.**

Sprint and T-Mobile reportedly are closer than ever to merging. We’ve heard this before, so has something changed?

A Reuters report says T-Mobile is close to agreeing to tentative terms on a deal to merge with Sprint, according to people familiar with the matter. Once terms are finalized, due diligence by the two companies would follow with a deal expected by the end of October. However, the whole thing could fall through, the sources said.

Neither Sprint nor T-Mobile would comment. In June, German publication Handelsblatt reported that T-Mobile’s Germany-based parent company, Deutsche Telekom, was preparing a plan to merge with the Overland Park, Kansas-based mobile carrier.

Michael Finneran, industry analyst and Channel Partners contributor, said T-Mobile and Sprint are gambling big on getting government approval for the merger, an approval that was denied under the prior administration.

“If the current administration is more accommodating, we could finally have a real competitor for the big two,” he said.

Rich Karpinski, 451 Research’s principal analyst of mobile operator strategies, said the Trump administration and the new Federal Communications Commission seem much more likely to approve a deal. There’s not much use in pursuing a merger if it’s not going to get regulatory approval, he said.

“Second, both companies are even better positioned than last time around,” he said. “T-Mobile is stronger than ever; Sprint has had its own nice little turnaround.”

The merger would immediately create a third carrier equal, in size at least, to AT&T and Verizon, Karpinski said.

“That said, the combined companies would very likely continue to be a challenger and disruptor – in particular given its much different take on video and content from AT&T/DirecTV/Time Warner and Verizon/AOL/Yahoo – or at least until the T-Mo/Sprint/cableco merger rumors start to fly as a next step.”

Todd Day, Frost & Sullivan mobile and wireless communications senior industry analyst, said the merger could “completely change the landscape of the wireless market in the United States.”

“With T-Mobile and Sprint merging, the end-result carrier would have a consumer count nearly identical to AT&T and Verizon,” he said. “T-Mobile has been growing rapidly over the past several years and has become a real threat for AT&T and Verizon. Their strong marketing push could create an even stronger surge for the combined company, as consumers are likely to view the new company as an equal to AT&T and Verizon.”


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