T-Mobile, Sprint may be merging soon
Both telecom carriers released Q3 data but then skipped investors’ Q&A sessions
The long-rumored merger of T-Mobile and Sprint may be happening soon, whittling down the major telecom carriers to three.
Both companies have decided this week to forego the investor question-and-answer sessions that typically take place after the carriers release their quarterly earnings.
T-Mobile struck first Monday, releasing its third-quarter earnings a day earlier than expected and, instead of a live Q&A with telecom analysts, the No. 3 wireless carrier opted for a video blog starring CEO John Legere. “With all the rumors and speculation out there we decided that we wanted to make sure you all saw and focused on our Q3 results,” he said in the video.
Also on Monday, two days before its own fiscal second-quarter results will be released, Sprint said it will not host a conference call Wednesday.
This is the “surest sign” that an announcement about a merger or an acquisition involving the two companies is imminent, said Roger Entner, analyst with Recon Analytics. “Why else would they, within 24 hours of each other, both Sprint and T-Mobile say, ‘Here are our results, and no, we are not going to talk to you.’ That means they probably have something else to talk about as early as this week.”
Three years ago, the nation’s No. 3 and No. 4 wireless providers considered joining forces; talk about the two companies merging has escalated in recent months. Masayoshi Son, the founder and CEO of Tokyo-based telecom and Internet company Softbank, which controls Sprint, has been looking for a deal to improve Sprint’s position.
He reportedly sought a merger of Sprint and Charter Communications, but Charter rebuffed that. Still, in August, Sprint CEO and President Marcelo Claure said the company would have an announcement “in the near future” addressing merger discussions.
While combining the two carriers could allow it to better compete against industry leaders Verizon and AT&T, the loss of one player arguably could reduce competition.
“Combining with another company could be good for T-Mobile in that it would give it bigger economies of scale and possibly add complementary network coverage, while getting rid of one of its three national competitors,” said Bill Menezes, principal research analyst with Gartner.
“I still have yet to hear how removing one of the players in a four-competitor market would be good for consumers, or whether it ever has been good for consumers in any other similar scenario.”
T-Mobile shares ended up 1.7% to $61.46; Sprint lost 1% to $6.86.
T-Mobile has lured away cus- tomers from its bigger competitors with aggressive marketing campaigns and products that bucked industry norms, like abandoning two-year cellphone contracts. In the latest quarter, it added 1.3 million net customers, its 18th consecutive quarter of adding more than 1 million. Revenue of $10 billion rose 8% from a year ago and beat expectations of analysts polled by S&P Global Market Intelligence.
But annual growth momentum is slowing from about 11% this time last year to 9%, said Craig Moffett of research firm MoffettNathanson. “With this as a backdrop, it is perhaps easier to understand now why T-Mobile and parent Deutsche Telekom have warmed to the idea of a merger sooner rather than later,” he said in a note to investors Monday.
Moffett puts the likelihood of regulatory approval of a merger at 50-50.
While the Trump administration would likely favor the merger for making a stronger third telecom competitor, the resulting company’s likely staff reductions might be cause for concern, Entner said.
“Why else would they ... say, ‘Here are our results, and no, we are not going to talk to you.’ That means they probably have something else to talk about.” Roger Entner, Recon Analytics