DIAL UP THE DRAMA
T-Mobile & Sprint liken merger to patriotic duty
More jobs, lower prices and wrapping it all in the US flag: That’s how T-Mobile Chief Executive John Legere and Sprint CEO Marcelo Claure portrayed their latest merger proposal.
While the two companies push the “It’s Good for America” angle — especially given their German and Japanese legacies — the proposed union seemed desperate in its overreach. And, in many ways, it is.
This is the third time they have tried to walk down the aisle in four years. And that’s after opposition from the Justice Department and the Federal Communications Commission in 2014 over reducing the number of nationwide wireless carriers from four to three.
Given that backdrop, Merrill Lynch’s telecom analysts said in an update Monday that “the best argument to be made would look out many years past the usual DOJ competitive horizon and argue that at the current course and speed, Sprint/T-Mobile would not be able to compete long term.”
In previous merger talks, T-Mobile and Sprint ranked No. 3 and No. 4, respectively. They still do, behind leaders Verizon and AT&T. The two leaders’ collective share has since increased from 68 percent to 69 percent, while the two laggards’ has fallen from 31 percent to 30 percent.
Market conditions have been so static that former FCC Commissioner Michael Copps told Common Cause on Monday that the newest T-Mobile/Sprint proposal should be “dead on arrival.”
Investors reinforced Copps’ take by sending TMobile shares down 6.2 percent and Sprint shares down 14 percent. The latter’s drop is telling because as Sprint is a takeover target, its shares should command a premium to induce shareholders to cede control.
The two wannabe partners have also hindered their case by being effective competitors, driving down prices while consumer options increased.
Moreover, given the Trump administration’s attempt to block AT&T’s acquisition of Time Warner, T-Mobile and Sprint’s proposal seems equally desperate in terms of timing.
Sprint is majority-owned by Japan’s SoftBank Group — yet the parent has refused to invest further in the money-hemorrhaging company, despite having a $100 billion “vision fund” for other technology investments.
T-Mobile is in better shape, but its Deutsche Telekom parent grew so weary of taking on Verizon and AT&T that it tried, unsuccessfully, to sell the US wireless unit in 2011.
That may even explain the deal announcement’s emphasis on jobs, prices and introducing expansion of 5G technology.
“We suspect the real audience for these public interest carrots is the FCC, which evaluates public interest, and the executive branch,” the Merrill Lynch team wrote.