The third- and fourth-largest wireless carriers have been flirting with each other for years. Is now the time for a deal?
T-Mobile and Sprint are quickly becoming the Ross and Rachel of the wireless industry.
The nation's third- and fourth-largest wireless carriers are in active discussions for a merger, according to a person familiar with the talks. It could take anywhere between three and five weeks before the deal might be made official, although there's no guarantee it will go through. CNBC's David Faber was the first to report on the talks.
A merger would mark the culmination of years of flirting between T-Mobile and Sprint. The combined company would have a shot at shaking up the industry, sizable enough to compete with larger rivals Verizon Wireless and AT&T. But opponents of a deal say the presence of four carriers has resulted in stiffer competition, lower prices and better deals for consumers.
Both companies have made their impact felt on the industry over the last few years. T-Mobile eliminated contracts and phone subsidies and last year led the push to bring unlimited plans back to the industry in a bigger way. Sprint introduced the concept of a phone leasing plan and this year began offering a year of its service for free.
They've tried to merge before. Sprint's parent, Japanese carrier SoftBank, tried to strike a deal with T-Mobile majority shareholder Deutsche Telekom back in 2014, but dropped its attempt when the government signaled that it favored four national competitors. But with a more business-friendly White House in place, the companies are attempting to get together again.
Under the proposed deal, Deutsche Telekom would be the majority shareholder, and T-Mobile CEO John Legere would run the company with his management team. SoftBank CEO Masayoshi Son would have a minority stake in the combined company.
Wall Street analysts and industry players have long called for the two to combine in an effort to challenge Verizon and AT&T. A combination would mean a heftier customer base and could lead to more retail outlets across the country and greater oomph in bargaining for network equipment at a lower price.
Sprint and T-Mobile each have valuable spectrum that could theoretically be combined for superior nationwide coverage for customers, although that would be years away. Sprint has a unique band of both high-frequency and low-frequency airwaves great for speed and coverage over distances, although they require special radios, while T-Mobile just won a valuable swath of low-frequency spectrum it is currently rolling out.
A larger company would also be better suited to investing in the upgrade to a 5G network.
The hope is that a third, more powerful player could drive more competition, although it's hard to argue that both Sprint and T-Mobile haven't already had a significant impact on the industry. T-Mobile earlier this month tacked on Netflix for its unlimited family plan customers, prompting AT&T to add HBO access to all of its unlimited plan options. (It was previously a perk for just the upper tier plan.)
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