The Sprint (S)- T-Mobile (TMUS) saga is back once again. The wireless carrier rivals have apparently reignited merger talks that were suspended last year due to a valuation disagreement. They are now back to the merger table, partly because the two intent to cut down on the financial stress of investing in their networks and competing in a saturated market.
The talks between the two key players — that could drastically change the dynamics of the US wireless industry — came about four years back in 2014. The duo, in the past four years, have abandoned the deal thrice, as both were either preoccupied with other deals or were concerned about the intense scrutiny by the antitrust regulators. With this merger, the companies plan to compete against the top two carriers – Verizon (VZ) and AT&T (T).
Shares of both the company surged following the announcement. However, the talks are said to be in the initial stage — so the chances of the deal falling apart is high given their past record.
In the past, the companies failed to finalize the deal due to the differences between the Germany-based Deutsche Telekom that hold nearly 63% stake in T-Mobile and SoftBank, the Japanese telecom giant that holds 85% stake in Sprint.
A big question that exists now is whether the US regulators will allow the deal to go through smoothly, considering the antitrust case between AT&T and the Justice Department. AT&T is being sued by the Justice Department for pushing with its $85 billion Time Warner (TWX) acquisition, which the regulators claim will harm the consumers. Even if the two companies settle on merger talks, they will need the sanction from the regulators.
Considering the deals the top two rivals are striking, Sprint and T-Mobile have nothing much left to do to stay relevant, but to combine.