Technology

Growth without scale: Deutsche Telekom's T-Mobile headache

Growth without scale: Deutsche Telekom's T-Mobile headache

Sprint and T-Mobile called off a merger, reports the AP, saying Saturday that they couldn't come to an agreement that would benefit customers and shareholders after years of dancing around a merger. A combined company would have had more than 130 million USA subscribers, behind Verizon Communications Inc (N:) and AT&T Inc (NYSE:).

Together, T-Mobile and Sprint would have had about 130 million customers, putting a merged entity a close third in the United States behind market leaders AT&T and Verizon.

The companies' unusual step of making a joint announcement on the canceled negotiations could indicate they still recognize the merits of a merger, keeping the door open for potential future talks. T-Mobile CEO John Legere reportedly spoke with his oft-rival, Sprint CEO Marcelo Claure, this week to make clear T-Mobile's commitment to keep negotiations alive. Its wide portfolio and clout have made it a good fit to own and operate Sprint from above thus far, though that was not always the case; at one point, Masayoshi Son was very open about the fact that the company was losing money thanks to Sprint. If the companies had struck a deal this year, they would have had a better chance of getting government approval under the Trump administration.

Analysts said an end to talks to T-Mobile would leave debt-laden Sprint without the scale needed to invest in its network and to compete in a saturated market.

Reports suggest that a major hurdle to the merger wasn't Sprint or T-Mobile directly, but rather the their ownership. Both companies may have to sort that out sooner rather than later. Sprint's parent SoftBank almost acquired T-Mobile in 2014 but the deal fell through after US regulators expressed concerns. (TMUS) and Sprint Corp.

Sprint and its owner, the Japanese conglomerate SoftBank, have always been looking for a deal as the company has struggled to compete on its own. What can the next era of T-Mobile and Sprint do to gain ground?

Industry executives have expressed optimism about the prospect of consolidation.


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