Sprint, T-Mobile reportedly rekindle merger talks

According to a new report in The Wall Street Journal, Sprint and T-Mobile have restarted merger negotiations.

The publication noted that the talks are still in their early stages and might not result in an agreement. However, the news is noteworthy considering the two companies have tried to merge several times over the course of the past several years.

The latest breakdown in negotiations between Sprint and T-Mobile occurred late last year. According to reports, the two companies couldn’t reach an agreement on the value of Sprint’s 2.5 GHz spectrum.

Indeed, according to a recent report from Cowen, T-Mobile’s merger plan with Sprint last year involved shutting down around 30% of Sprint’s cell sites and then deploying Sprint’s 2.5 GHz spectrum nationwide. However, since those talks broke down, Sprint is now embarking on its own major 2.5 GHz spectrum build-out with up to $6 billion in cash this year from parent SoftBank.

Indeed, T-Mobile executives have publicly expressed regret that the carrier hasn’t been able to ink a merger with Sprint. “This team was highly convicted that we had a unique opportunity for value creation with the Sprint deal,” T-Mobile CFO Braxton Carter said early this year. “Very conservatively, there were at least $37 billion of hard synergy [in the now-collapsed deal]. Mostly in the network. You know, Neville [Ray, T-Mobile’s CTO] and his team for 4-5 months built the most detailed Newco [combined T-Mobile and Sprint] network model—it was a thing of beauty. … But it wasn’t meant to be.”

Added Carter: “Could something happen in the future? You never say never.”

Of course, any T-Mobile merger with Sprint would be complicated by the two companies’ parents: Sprint’s SoftBank and T-Mobile’s Deutsche Telekom. Further, AT&T’s attempted merger with Time Warner has run into a Department of Justice lawsuit and the carrier is now in court arguing against that actiona situation that analysts have argued has stifled additional M&A in the telecom industry.