The deal is likely to attract rigorous scrutiny from antitrust regulators.
According to sources familiar with the matter at hand, T-Mobile, the largest wireless operator in the U.S., is exploring the potential acquisition of its rival Sprint Corp in an all-stock deal. The development comes in the wake of the SoftBank Group Corp offering to give up its majority stake in Sprint.
Japan’s SoftBank may be willing to to give up its controlling stake in Sprint to clinch a merger with T-Mobile; it will retain a minority stake in the combined company.
Both Sprint and T-Mobile are controlled by Germany’s Deutsche Telekom AG.
As per a source, the two firms are still weeks away from any agreement; they may not even have settled on a share exchange ratio or even started performing due diligence on each other.
Both companies have agreed that John Legere, T-Mobile’s outspoken chief executive will run the combined company should there be a deal, said the source, who preferred the cover of anonymity since the negotiations are confidential.
Sprint and T-Mobile did not immediately respond to requests for comment.
In the wake of CNBC’s report of negotiations between the two companies, Sprint’s shares rose by 8.2%; T-Mobile’s shares were also up by almost 5.3%.
Despite potential risks from antitrust scrutiny, investors have long expected a deal between the two, in the hope of cost cuts and other synergies.
Incidentally, T-Mobile has been increasing its market share in the saturated U.S. wireless market through improvements in its network infrastructure and lower prices.
As per a source, Sprint had earlier approached Charter Communications Inc, a cable company, regarding a potential merger. Those plans however have been placed on the back burner as it focuses on negotiations with T-Mobile.
As per another source, French cable mogul Patrick Drahi’s Altice USA Inc, is continuing to work on a potential bid for Charter.
Altice declined to comment while Charter did not respond to a request for comment.
Last month, Sprint’s chief executive said an announcement on merger talks should come in the “near future.”
Significantly, three years ago, SoftBank had abandoned talks to merge T-Mobile with Sprint midst opposition from U.S. antitrust regulators. That deal would have put SoftBank in control of the merged company, with Deutsche Telekom becoming a minority shareholder.
Since then, T-Mobile has overtaken Sprint in market capitalization: while T-Mobile’s valuation is $51 billion, Sprint’s market value is around $34 billion.