Both T-Mobile and Sprint’s stock prices rallied Friday afternoon following a Reuters report that Japan’s SoftBank Group is considering ceding control of Sprint to Deutsche Telekom, bolstering the possibility of a long speculated merger between the third and fourth largest U.S. wireless carriers.
SoftBank hasn’t approached Deutsche Telekom, the majority owner of T-Mobile, yet, the report says. That’s because the Federal Communications Commission had banned discussions among rivals during an ongoing wireless spectrum auction. But Reuters, which pinned the report on people familiar with the matter, said merger discussions could begin in April.
T-Mobile’s stock closed up around 5.5%; Sprint’s stock climbed 3.3%.
Sprint and T-Mobile declined comment on the report.
Back in August 2014, the two rivals called off merger talks, because it was believed that the U.S. regulatory hurdles were too steep. But in December, SoftBank CEO Masayoshi Son met at Trump Tower with then-President-elect Donald Trump, rekindling speculation that a merger could indeed take place.
“Both parties have been interested in (a merger) for quite some time,” says wireless analyst Chetan Sharma, who estimated a merger price tag of $70 billion.
“SoftBank would have to part with a lot of cash, but it has the assets” to get the deal done, Sharma says.
According to Reuters, Softbank would be willing to give up its control of Sprint and retain a minority stake in a merged telecom company.
In an interview earlier this week, T-Mobile’s chief operating officer Mike Sievert told USA TODAY, “We’re very strong on a standalone basis. And that being said, we’re also opportunistic and our stance on that has been consistent for years. And if the right opportunities came along to turbo-charge our strategy, our brand, our set of assets, we’d be open to it.”
Despite the speculation expressed after the Trump-Son meeting, it remains to be seen how receptive the Trump Administration will be to a Sprint-T-Mobile pairing.
Equally uncertain is how willing Deutsch Telekom CEO Tim Hoettges is in reviving merger talks. Speaking at an investors’ conference in November,
Hoettges indicated that he was “not in the mood” to sell T-Mobile, Reuters reported.
Deutsch Telekom owns about a 65% stake in T-Mobile, whereas SoftBank owns about 83% of Sprint.
The latest merger speculation follows a wild week kicked off by Verizon in which the four major U.S. wireless carriers each tried to one-up the other with fresh “unlimited” consumer offerings, possibly creating a counter-argument to any such deal.
“Isn’t Verizon’s pricing response a sign that the four player market is working precisely as it should?” asked MoffettNathanson telecom analyst Craig Moffett after T-Mobile reported its quarterly earnings this past Tuesday.
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Contributing: Jon Swartz
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