SoftBank’s US business Sprint kicked off informal talks with Deutsche Telekom owned T-Mobile US over a possible merger, opening up the potential for a mega deal which would severely shake up the country’s mobile market.
Bloomberg reported executives from Sprint and its owner SoftBank had started preliminary conversations with T-Mobile US parent Deutsche Telekom, although banks have not been formally hired at this stage.
Speculation around a potential deal between the two heightened in recent months, with both Masayoshi Son, SoftBank’s CEO, and Deutsche Telekom CEO Tim Hottges stating in separate earnings calls they’d be open to exploring such a merger.
However, until now, there had not been any news on discussions between the two.
Bloomberg said merger talks in the US mobile market have been on hold for almost a year because of a government clause relating to a spectrum auction, which required operators to avoid negotiating deals until 27 April.
Test for Trump
Should a deal be thrashed out, there would no doubt be severe regulatory scrutiny involved, because the merger would reduce the number of major players in the US mobile market from four to three.
Indeed, Sprint and T-Mobile US tried to merge back in 2014, but negotiations fell apart due to regulatory concerns.
A T-Mobile US/Sprint tie-up would also go some way to revealing the Trump administration’s stance on mega mergers in telecoms.
So far, Trump’s pick to lead the Federal Communications Commission, Ajit Pai, indicted the US regulator could be open to big deals.
Arguably, the tables have also turned since the mooted deal in 2014, regarding the position of the two operators.
T-Mobile US has gone from strength to strength in recent years, surpassing Sprint in terms of subscribers and displacing it to become the country’s third largest operator.
There is no clear indication yet whether T-Mobile US would want to be the acquirer in any deal, given Sprint’s struggles to maintain market share.
Deutsche Telekom, on the other hand, may also be reluctant to sell, given its US business fuelled much of its overall growth in recent quarters.
There is also speculation the country’s cable operators may be interested in acquiring a mobile operator, to boost their wireless ambitions. T-Mobile US and Sprint have been highlighted as obvious candidates, so may face competition for a deal.