T-Mobile is one of the world’s largest wireless network operators. Based in the United States, it’s the third largest wireless carrier in the US with about 71.5 million customers as of Q4 2016. Sprint Corporation – more famous as just Sprint – is an American telecommunications company that provides wireless services. Also an Internet Service Provider (ISP), Sprint is the fourth largest mobile network operator in the United States and serves about 60 million customers.
Sprint and T-Mobile may merge soon
According to UBS Analyst John Hodulik, a T-Mobile-Sprint merger is highly likely. Currently, the FCC auction of 600MHz spectrum is keeping the executives from both the companies busy. Once the auction concludes, T-Mobile and Sprint may chart out the merger agreement. Two of the world’s largest network operators coming together is likely to boost revenues for both the companies. T-Mobile will gain from Sprint’s large inventory of high-frequency spectrum while Sprint can cash in on the prospects of rapidly growing T-Mobile market.
The merger is likely targeted at taking on Verizon and AT&T. AT&T, also an American telecommunications conglomerate, is the second largest provider of mobile telephone services and the largest provider of fixed telephone services in the United States. Taking on AT&T is no joke, but the merger is likely to put Sprint and T-Mobile in a better position to compete with AT&T and Verizon. Among the two, it looks like T-Mobile is in a better position to receive a merger proposal, thanks to concentrated efforts on marketing and promotion which have given T-Mobile’s financials a significant boost.
John Hodulik, UBS Analyst had this to say about the merger –
We continue to believe a Sprint/T-Mo announcement is likely given the benefits of moving from four wireless players to three and the significant synergies it would create. In addition, we believe the timing is appropriate: (Sprint’s parent) SoftBank has already recovered its cost basis, turned the asset around operationally and financially, and moreover a deal would allow SoftBank to deconsolidate $30B+ in debt. SoftBank’s Masayoshi Son has already laid the political groundwork, promising to invest and create jobs in the U.S. We also note that the company has focused on strategic value rather than valuation in past acquisitions; we believe a premium here would make sense given asset scarcity and also valuation support and synergies.