Sprint, T-Mobile Hit a Stone Wall in Merger Plans

Nov 01

Merger negotiations between Sprint and T-Mobile have hit a stone wall again, with the former’s parent company, Softbank, apparently ready to walk away from the table. The news came as a surprise as the merger was expected to be formally announced at the end of October or early November.

It has been reported that Sprint and T-Mobile are once more at loggerheads over the merger. The problem reportedly boils down to whether Softbank or Deutsche Telekom, T-Mobile’s parent company, that would end up having a bigger share in the deal.

It has been widely believed that Deutsche Telekom would have a controlling share of the merged companies since T-Mobile has 10 million more subscribers than Sprint. Conventional business practice dictates that in a merger, the larger company would be assuming control.

Softbank initially appeared to be amenable with the situation. However, Japan’s financial newspaper, Nikkei, reported that it’s not.

According to reports, Softbank is determined to have the controlling share. The company’s board has allegedly voted last Friday to retain control of the combined companies and is apparently willing to end negotiations if it doesn’t get it.

The disagreement between the two companies is just par for the course. In 2014, both Deutsche Telekom and Softbank ended negotiations when it appeared that the deal would be blocked by regulators. Talks were resumed after Donald Trump was elected president.

It’s highly unlikely that the merger talks between the two companies would end that easily, as both Softbank and Deutsche Telekom have a heavy interest in the deal. In any case, they do have other options open to them, including new partners.

There’s a possibility that Softbank is hoping the news that they will “propose ending the negotiations” will get T-Mobile’s parent company to reconsider some of their terms. Some industry insiders believe the move is a bluff by Softbank CEO Masayoshi Son to get a better deal from T-Mobile. The CEO has billed himself as an accomplished deal-maker, and some say Son would consider losing control of the combined corporation as a personal failure.

If Sprint and T-Mobile do come to an agreement and merge, their combined assets will put them on the same footing as AT&T and Verizon. Instead of being a close third and fourth place in the market, the merged companies would be squarely in the third spot.

The merger would also lead to a major change in America’s wireless sector, as the two medium-sized companies will be transformed into one of the industry’s major players.  

[Featured image via T-Mobile/Sprint]