​Jeff Kagan: Will FCC Allow T-Mobile and Sprint to Merge?

Jeff Kagan  |

We are hearing about T-Mobile (TMUS) and Sprint (S) talking about a merger. So, this is a good time to ask this question, would a merger be approved? The FCC now says, “effective competition” exists in the U.S. wireless marketplace. What does that mean? Does that mean it will now be harder to get M&A approval? It may indeed.

We have seen so many mergers and acquisitions in wireless and telecom over the last decade or two that we expect more to occur. A decade or two ago, the wireless and telecom marketplace looked very different. Back then there were seven baby bells, three big long-distance giants, hundreds of smaller one, and loads of small wireless and cable television competitors. Over time, these separate industries came together. M&A has changed the landscape. Today, we have fewer and larger competitors offering all these services.

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Today, there are two or three large baby bells, AT&T (T) and Verizon (VZ), and CenturyLink (CTL). AT&T and Verizon offer the widest array of services like wireless, telephone, Internet, pay TV and more. During the last decade, we saw AT&T Mobility and Verizon Wireless rapidly grow. During that same time, Sprint and T-Mobile were struggling to simply survive.

T-Mobile and Sprint Are Now Growing in Wireless

However, in the last few years, T-Mobile has shown strong growth and has moved up to number three. Sprint is also doing better than a few short years ago, but they still struggle with issues like customer acquisition. That’s why they are trying to battle this being the least expensive option in the marketplace whenever possible.

That’s also why Masayoshi Son, CEO of Softbank (SFTBY), owner of Sprint, and Marcelo Claure, CEO of Sprint are trying to merge with another company with deep pockets. First, they wanted to merge with T-Mobile, but that was shot down several years ago by regulators. They still want to merge with T-Mobile if possible.

However, according to the recent FCC comments, this could be getting harder, not easier. Now, they are interested in talking with any other company expressing interest in getting together. A few months ago, Comcast (CMCSA) and Charter (CHTR) expressed interest. Things looked like they were getting better. However, nothing happened. And when reports of Sprints interest in merging with Charter were discussed, Charter said no.

So, the question now is simple. Is Sprint desirable to a partner or as a merger target? Would it make sense for a company like Sprint to merge with another? Perhaps. Merging with another wireless carrier would create a stronger wireless competitor. Merging with a cable television company would create another wireless and wire line competitor.

There are all sorts of deals that would make sense for Sprint. The problem is, there doesn’t seem to be any interested parties. Not today anyway. That’s both curious and interesting. Something to keep our eyes on.

FCC Comments Say Wireless M&A May Have Just Become Harder

Now, the FCC weighs in saying they like the current state of wireless. They like having four, strong wireless competitors. They like having Sprint and T-Mobile at each other’s competitive throat. They like the deals this competition brings to the marketplace.

Reading between the tea leaves seems to say the road to a merger just got tougher.

So, will more deals be approved like we have seen in the past decade or two? Maybe. Maybe not. If so, these deals may have to pass a higher muster to win approval. They must improve the competitive marketplace, not just each company.

So, what’s coming next? That’s the big question. Will other mergers be allowed? We’ll just have to wait and see what the FCC says and what happens next. The good news is wireless seems to be stronger than ever and the competitors seem to be as well. However, this good news may mean M&A just got tougher to accomplish. Let’s keep our eyes on this.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.

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