Sprint said to look beyond T-Mobile as it considers ways to unlock value
Wall Street is betting Sprint Corp. and T-Mobile US will soon revive talks on a blockbuster merger, but a recent surge in demand for wireless assets has Sprint exploring other ways to unleash value.
Sprint parent SoftBank Group Corp. believes the company’s vast trove of wireless spectrum, which can be used for faster 5G services, has been undervalued, a view bolstered by AT&T’s lofty $1.6 billion purchase of Straight Path Communications, according to people familiar with the matter.
Executives have been bandying about ways to better reflect the value of Sprint’s airwave licenses, even entertaining the notion of spinning off some spectrum into a separate, publicly traded company, the people said. A deal with T-Mobile or another party would have to properly compensate Sprint for its airwaves, they said.
While Sprint’s subscriber growth has improved and its debt has gotten more manageable, the company is still mired in fourth place in the U.S. wireless market, and a deal with third-place T-Mobile remains the most obvious way to better take on AT&T and Verizon Communications. There is still enormous pressure on Sprint to make a deal, with billions of dollars of debt coming due and a network that needs investment. SoftBank’s chief executive officer and controlling shareholder, billionaire Masayoshi Son, would risk the ire of his own investors if he sought to bail Sprint out with the parent company’s money.
For all those reasons, a deal is still likely for Sprint. What has changed is that Sprint and SoftBank now see themselves with a wider set of options than T-Mobile alone, and a stronger hand to play in negotiations.
Merger talks in the wireless industry have been on hold for almost a year because of a government spectrum auction that required participants to avoid negotiating deals with each other. That gag order gets lifted on Thursday. Sprint also believes it could get overtures from cable companies, such as Comcast Corp., Charter Communications and Altice, the people said.
Sprint CEO Marcelo Claure and his team have made extraordinary efforts to stabilize the business by slashing costs and pawning assets. Sprint has improved its liquidity to more than $11 billion thanks to debt transactions that have cut the company’s reliance on the high-yield market. It’s earned ratings upgrades from Moody’s Investors Service and S&P Global Ratings, though S&P noted that “significant” maturities are approaching in the coming years.