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Sprint Corp, T-Mobile call off merger after months of talks

A combined company would have had more than 130 million US subscribers, behind Verizon Communications Inc and AT&T Inc

Reuters  |  San Francisco/New York 

File photo of smartphones with the logos of T-Mobile and Sprint. (Photo: Reuters)
File photo of smartphones with the logos of T-Mobile and Sprint. (Photo: Reuters)

Corp and Inc said on Saturday they have called off talks to create a stronger wireless company to rival market leaders, leaving No 4 provider to engineer a turnaround on its own.

The announcement marks the latest failed attempt to combine the third- and fourth-largest wireless carriers, as parent SoftBank Group Corp and parent Deutsche Telekom AG, show an unwillingness to part with too much of their prized assets.

A combined company would have had more than 130 million subscribers, behind Verizon Communications Inc and AT&T Inc.

The failed could also help keep wireless prices low as all four providers have been heavily discounting their cellphone plans in a battle for consumers.

"Consumers are better off without the because and will continue to compete fiercely for budget-conscious customers," said Erik Gordon, a Ross School of Business professor at the University of Michigan.

The companies' unusual step of making a joint announcement on the canceled negotiations could indicate they still recognize the merits of a merger, keeping the door open for potential future talks.

and said they ended talks because the "were unable to find mutually agreeable terms."

John Legere, chief executive of T-Mobile, said in the statement that the prospect of combining with was compelling, but "we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile's shareholders compared to our outstanding standalone performance and track record."

CEO Marcelo Claure said that even though the could not reach a deal, "we certainly recognize the benefits of scale through a potential combination."

Claure also said has agreed it is best to move forward on its own with its assets "including our rich spectrum holdings, and are accelerating significant investments in our network to ensure our continued growth."

SPRINT'S ROAD AHEAD

Failure to clinch an agreement leaves SoftBank CEO Masayoshi Son, a dealmaker who raised close to $100 billion for his Vision Fund to invest in technology companies, needing to find another option for

is in the middle of a turnaround plan and has sought to strengthen its balance sheet by cutting costs. But industry analysts have expressed concern that the company, weighed down with total debt of $38 billion, has few financial options.

Even though its customer base has expanded under CEO Claure, growth has been driven by heavy discounting.

Analysts said an end to talks with would leave debt-laden without the scale needed to invest in its network and to compete in a saturated market.

has sought to strengthen its balance sheet by cutting costs and mortgaging a portion of its airwaves and equipment.

Mark Stodden, analyst at Moody's Investors Service, said about Sprint: "To really take the kind of next step from a business that has been stabilized to a business that has been growing is going to require a new more intense investment phase."

is in a better position as a standalone company, analysts have said.

T-Mobile, controlled by Germany's Deutsche Telekom which owns roughly 65 percent, became the first major carrier to eliminate two-year contracts - a shift quickly embraced by consumers and copied by competitors. The company has also badgered rivals with its unlimited data plans.

Deutsche Telekom CEO Tim Höttges said in a statement on Saturday that has a "strong basis for growth in the upcoming years."

MONTHS OF TALKS

Both had expressed interest in a tie-up this year. SoftBank was prepared to give up control to do a deal with T-Mobile, sources familiar with the company's thinking told Reuters in February.

But no deal was announced immediately following the conclusion of a ban on talks in the spring that was associated with a government auction of wireless airwaves.

Both and said they were open to exploring other options.

An added wrinkle was Sprint's negotiations with cable Comcast Corp and Charter Communications Inc.

A source told Reuters in July that SoftBank was considering an acquisition offer for Charter in a deal where it would combine the cable company with

The two came close to announcing a in 2014, but called it off at the last minute due to regulatory concerns.

Industry executives have said a combined Sprint-entity would have the scale, network and enhanced portfolio of wireless airwaves and a better chance to develop 5G, the next generation of wireless technology.

Even if and had agreed on terms, they would have faced major challenges convincing antitrust regulators that their deal should be approved.

"This is good news for consumers - a potential by and could have raised serious antitrust issues," Senator Amy Klobuchar of Minnesota said in a statement.

First Published: Sun, November 05 2017. 10:27 IST
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