Sprint's fate will have to wait until Uncle Sam's sale ends

Kansas City Star |

--Cue the "Jeopardy!" music, Kansas City. We won't know for some time whether Sprint's owners really decide to sell off the hometown giant.

Merger talks in the telecommunications industry essentially are off-limits under a federally imposed "quiet period" that began a year ago. Nobody knows when it will end, though one estimate has it lingering possibly into late April.

Until it does end, Sprint and its potential suitors -- or targets it might decide to bid for (think T-Mobile) -- can't even talk about such things, let alone tell the rest of us what they've agreed to do.

"These guys are probably blocked from having any discussions until the end of March, and it's going to go into April. It's certainly possible it could go even late into April," said Walter Piecyk, an industry analyst at BTIG Research.

This means Kansas City can add the angst of waiting for an answer to the disturbing news Wednesday that Sprint might get sold. The news came from Sprint chairman Masayoshi Son, who also is CEO of Tokyo-based SoftBank Group Corp. SoftBank owns more than 80 percent of Sprint's shares.

Until Wednesday, SoftBank and Sprint were widely expected to be buyers and specifically targeting T-Mobile, which Son had wanted to buy three years ago until regulators dashed those hopes. Son's remarks showed he's equally willing to sell Sprint, or deal with some other company entirely.

In other words, Sprint's future is wide open.

Hanging in the balance are Sprint's Overland Park headquarters, the 6,000 jobs there, all the business Sprint does locally and the philanthropy it and its employees extend to the community. It's unclear how any of that stands on the other side of a sale or merger.

A Sprint spokesman said the company had nothing to add to its chairman's comments.

So what's the holdup? What's keeping us from finding out Sprint's fate?

The culprit is Uncle Sam's complex process of buying up airwaves licenses from television stations and reselling them to telecommunications companies. T-Mobile, Verizon, Comcast and others are in the final stages of that auction of wireless spectrum they could use to enhance or build wireless networks across the nation.

As Washington began the auction process, regulators imposed a quiet period aimed at preventing bidders from colluding. Experts say the anti-collusion order effectively put merger talks and other strategic communications off-limits until the federal auction ends.

And the end seems to keep moving farther and farther away.

"Things are really slowing down. And there's extra process time in there, so we don't know," said Piecyk, who has been tracking the auction's progress closely.

Previously, it had looked to Piecyk as though the auction could wrap up by . Now, the pace seems likely to stretch the silence into April.

That leaves off-limits even merger talks that theoretically could be allowed in the quiet period.

Cable giant Comcast, for example, is in the government auction and has been mentioned as one possible suitor for Sprint. Because Sprint isn't bidding, there's nothing for the two companies to collude over.

Experts, however, say they are cautioning companies to adhere to the broader spirit of the quiet period, if for no other reason than to play it safe with Washington. After all, those companies will need federal regulators' approval for any future merger or other strategic deals they plan.

In addition to delaying the timing of merger talks, the outcome of the government's airwaves auction also may influence who comes knocking on Sprint's door, or who Sprint and its parent SoftBank might consider attractive partners.

For example, prices in the airwaves auction seem to be coming in much lower than analysts had expected. It means winning bidders could emerge with more wireless spectrum and more room in their budgets for cutting deals with other companies.

Amy Yong, an analyst at Macquarie Research, said Comcast's spending in the federal auction likely will influence what it does next. Spending $5 billion or more would be seen as a commitment to enter the wireless market, she wrote. Spending less than $4 billion might mean Comcast was saving its money to buy an existing wireless company.

Wells Fargo Securities analyst Jennifer Fritzsche has been forecasting that T-Mobile would spend $8 billion in the airwaves auction. But it could emerge in stronger shape and with more money left over.

"While we will not know the winners of the auctions for several weeks after the auction concludes," she wrote clients in late January, "we believe TMUS (T-Mobile) could walk away with a meaningful chunk of spectrum at prices significantly lower than we would have thought."

Mark Davis: 816-234-4372, @mdkcstar


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