T-Mobile and Sprint are once again in talks to merge, according to reports.
The country's third- and fourth-largest cellphone carriers have reportedly begun informal discussions to explore a deal, according to Bloomberg News, after the parent companies of both firms this week publicly expressed an openness to tying the knot with other companies.
Speculation about a possible merger involving T-Mobile and Sprint has been swirling for months, amid expectations that regulators under President Trump may be more willing to allow a combination than they were under President Barack Obama.
Sprint and T-Mobile both declined to comment.
Telecom and cable companies have also been forbidden from negotiating mergers and acquisitions in recent months because of a high-stakes airwaves auction run by the Federal Communications Commission. Now that the auction has ended, analysts widely expect a frenzy of merger announcements in the coming months.
In earnings reports this week, Deutsche Telekom — the German owner of T-Mobile — told reporters Thursday that it would consider a deal with interested companies.
“It is not only permitted and possible, but now very likely that discussions will get under way concerning various potential strategic combinations of businesses in our industry,” said Deutsche Telekom chief executive Tim Hoettges. “That includes our company, T-Mobile US.”
Softbank, the Japanese conglomerate that owns Sprint, was more specific this week, with billionaire chief executive Masayoshi Son publicly naming T-Mobile on Wednesday as the “most orthodox choice.”
“We'd sincerely love to begin talks,” Son said.
Despite the change in administration, a deal could still face hurdles in Washington. In 2014, Sprint's bid to purchase T-Mobile fell apart, over regulators' concerns that the acquisition would hurt competition by eliminating a major wireless carrier. Instead of having four nationwide competitors, the market for cellphone service would be reduced to three players. A combination between the two today would not change that outcome.
But much has also changed in three years. Soon after the collapse of the proposed tie-up, T-Mobile surged ahead of Sprint to become the third-biggest U.S. cellphone carrier. At the heart of its strategy was T-Mobile chief executive John Legere, who launched a bid to change key aspects of the industry. Doing away with early-termination fees, long-term contracts and other customer frustrations, T-Mobile began siphoning off subscribers from even its largest rivals, AT&T and Verizon. Now, the tables have turned: Sprint has said it is willing to let T-Mobile run the combined company, should a merger occur.
For its part, Sprint has grown ever weaker since the failed T-Mobile deal, analysts say.
“They are spending almost nothing on their network,” wrote Craig Moffett, an industry analyst at the research firm MoffettNathanson, in a report last week. “Their margins are still awful. And despite hyper-aggressive pricing, they are still only barely growing their subscriber base.”
Merging Sprint and T-Mobile would grant the combined company more scale, which could help it compete against AT&T and Verizon; that's the argument that Sprint made to regulators in 2014. But T-Mobile is already performing well against those firms, and its chief financial officer Braxton Carter has hinted that buying a cable company may better serve T-Mobile's long-term interests.
The cable industry's growing linkages to the wireless business complicate the picture in other ways. Cable companies such as Comcast will soon add cellphone service to their bundle of offerings, too, potentially changing the balance of power in the cellular industry. And wireless data connections are becoming even more vital as Americans continue to shift to mobile devices and turn to smart, Internet-connected appliances to accomplish everyday tasks.
The growing role of cable in the wireless business, not to mention T-Mobile's success, may help assuage regulators' fears over a loss of competition in a T-Mobile-Sprint deal, analysts say. And the FCC, which would be partly responsible for approving such a merger, is currently led by Ajit Pai, a Republican who is viewed as largely pro-business and anti-regulation. That could also bolster the companies' chances, if negotiations continue.