A potential merger of T-Mobile and Sprint is far from certain, some industry watchers believe. Analysts at Cowen Group and Barclays recently expressed a degree of skepticism regarding a possible consolidation of the third and fourth largest wireless service providers in the United States, citing a number of obstacles that could delay the deal or completely prevent it from materializing. Sprint's parent company SoftBank was interested in acquiring T-Mobile after purchasing a controlling stake in the Overland Park, Kansas-based mobile service provider in late 2012, but was effectively prevented from doing so by the U.S. Federal Communications Commission (FCC) and Department of Justice (DOJ) under the former Obama administration when both federal agencies signalled that they're opposed to the deal. Almost half a decade later, rumors of a potential consolidation reemerged following the arrival of a new government led by President Trump, but the newly introduced possibility doesn't equate to a done deal, experts say.
Both Sprint and T-Mobile were performing in a radically different manner and had much more incentive to be open to the idea of a consolidation back in 2012, Cowen Group's recent research note reads, adding that the two mobile service providers are doing much better on their own these days and are less pressured to push for a merger. SoftBank and T-Mobile's parent Deutsche Telekom also used to view their U.S. subsidiaries in a different light, with their valuations being significantly different than they are today, the note says. While SoftBank is still reportedly interested in acquiring T-Mobile, the blessing from the current U.S. administration might not be enough for that deal to materialize due to the fact that the Bellevue, Washington-based wireless carrier currently has a market cap of over $54 billion, approximately 22 times more than it did five years ago, meaning that the Japanese telecommunications giant would have to pay a premium for a controlling share of its stock. Likewise, Sprint has recently been improving its performance under CEO Marcelo Claure and may return to the track of long-term sustainability in the future, some analysts believe.
Regardless, T-Mobile, Sprint, and their parent companies have reportedly already opened informal talks on a potential merger following the recent expiration of the FCC's broadcast spectrum incentive auction. While it remains to be seen whether the two carriers end up merging, an update on the matter will likely follow in the coming months.