T-Mobile aborted deal for Straight Path casts light on Sprint merger

Finance


The Straight Path deal was one of the factors that pushed the companies to jump-start 2017 negotiations. Those negotiations ended up failing, but several things have happened in the past few months to bring SoftBank’s Masayoshi Son back to the table.

First, the two companies’ stock prices settled, making the valuation of both companies more transparent. In a stock-for-stock merger, the stabilizing of the share prices, without as much premium built in from imminent M&A speculation, helped convince both sides of their relative values, said two people familiar with the deal.

Second, both Sprint and T-Mobile now believe AT&T and Verizon could roll out 5G in select U.S. cities as soon as later this year. The 2018 Winter Olympics in South Korea already debuted 5G technology, although handset technology won’t bring 5G to the U.S. en masse until 2019.

Third, the cable giants are coming: Comcast has entered the mobile market, and Charter is also working on a mobile service. While the cable companies use Verizon’s network, they’ll increasingly sell and market wireless services with existing TV, phone and broadband, creating a fully bundled product for customers. Comcast said earlier this year its Xfinity Mobile service already had 380,000 customers in less than a full year on the market.

Back in February, T-Mobile CEO John Legere called Comcast’s mobile service “very irrelevant” and said Charter’s mobile service would be “irrelevant squared.”

“The furthest thing from my mind is any concern about the impact of cable,” Legere said.

Expect his tune to change as Sprint and T-Mobile try to sell regulators on deal, which will hinge on whether the companies can truly compete in a 5G world.

And while the two companies will argue about the importance of staying ahead of China on 5G development, the fact is no one really knows what 5G means. That could help Sprint and T-Mobile convince regulators they need to merge, if 5G is seen as the pot of gold on the other side of the rainbow. But it’s also a convenient focus instead of the $43 billion in synergies that will come with a deal, which will almost certainly come with some job losses.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.



Source link

Products You May Like

Articles You May Like

Are collectibles for collecting or investing? Advisors weigh in
US considers requiring 5G equipment for domestic be made outside of China: WSJ
A Federal Reserve letdown on interest rate poses stock market threat
politics a factor in return of Boeing’s 737 Max
Analysts now expect the earnings recession to last through the third quarter

Leave a Reply

Your email address will not be published. Required fields are marked *