Sprint and its parent company SoftBank have opened unofficial merger talks with T-Mobile, sources with knowledge of the situation said on Friday. The companies have reportedly approached T-Mobile’s owner Deutsche Telekom AG and have started informal negotiations on the matter, though it’s currently unclear when the initial contact was made. Both parties have previously reiterated that they’re open for mergers in the near future, with many industry watchers pairing them together due to SoftBank’s previous attempts to merge Sprint and T-Mobile in an effort to more efficiently compete with Verizon and AT&T.
The merger talks would have likely started sooner had it not been for the ban on such negotiations imposed by the United States Federal Communications Commission (FCC) almost a year ago due to the nation-wide spectrum auction that was concluded earlier this year. Regardless, the talks are still in extremely early stages and only include officials of SoftBank, Sprint, T-Mobile, and Deutsche Telekom, sources claim, adding that numerous banks and other financial institutions are already testing the waters in hopes of securing a role in the potential transaction that’s expected to be worth tens of billions of dollars. The German mobile service provider isn’t the sole owner of T-Mobile, but seeing how the firm holds a 65-percent stake in the third-largest wireless carrier in the country, buying out the majority of its share in the company is the most straightforward method of acquiring T-Mobile for SoftBank.
The Japanese conglomerate already tried acquiring T-Mobile in 2014 but was effectively stopped from doing so by the FCC and the Department of Justice (DOJ) under the former Obama administration. However, following the recent arrival of the new, Republican-led government, the regulatory scrutiny of the telecommunications industry in the country is loosening and many analysts believe that this is the optimal time to attempt a major merger. Regardless, the deal itself will likely prove to be challenging to structure due to T-Mobile’s growing valuation that currently sits at around $55 billion, as well as Sprint’s recent financial issues that could prompt the company to speed up merger talks despite the fact that its management claims the Kansas-based wireless carrier can afford to be patient with any potential M&As.