T-Mobile and Sprint inch closer to a merger (TMUS, S)

wireless carrier movement

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T-Mobile and Sprint are reportedly in active merger talks, according to CNBC citing people familiar with the matter.

The two companies are likely seeking to join forces to become more competitive against US wireless carrier leaders Verizon and AT&T.

US smartphone penetration is approaching saturation, causing mobile carriers to fight over each other’s subscribers. About 95% of Americans own a cell phone, and 77% own a smartphone, according to Pew Research, making new subscribers a rare commodity.
Merging would give the newly formed company a share comparable to Verizon’s and AT&T’s. As of Q2 2017, T-Mobile reported 70 million subscribers, and Sprint reported 53 million, for a total of 123 million subscribers. That's compared with AT&T’s 137 million subscribers and Verizon’s 147 million.

This isn’t the first time the two companies have entertained a potential merger. Softbank, Sprint’s parent company, attempted to acquire T-Mobile back in 2014, however, strict regulations from the Federal Communications Commission (FCC) muted the company’s efforts. And earlier this year, Softbank expressed renewed interest in making an offer for T-Mobile.

This time around, however, the environment is looking more favorable for a telecom merger. With the induction of President Donald Trump, the formerly democratic FCC, led by chairman Thomas Wheeler, handed over the reins to GOP chairman Ajit Pai. The new, less involved regulatory body, has indicated that it would roll back some of the more stringent regulations of the previous administration’s FCC. The less restrictive regulatory body could aid potential mergers and acquisitions.

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