Sprint Chairman Confirms Interest in T-Mobile Deal

Sprint Chairman Confirms Interest in T-Mobile Deal

Sprint Chairman and SoftBank CEO Masayoshi Son said in a television interview that he would like to buy T-Mobile US, confirming his interest in a deal that would combine the U.S.’s third-largest and fourth-largest mobile operators. “We would like to make the deal happen, but there are steps and details that we have to work out,” Son told the interviewer, adding that while Sprint had “not yet” made an offer for T-Mobile, it intends to give the deal “a shot.” Son said that the potential takeover would give Sprint the scale it needs to compete with AT&T and Verizon, allowing it to roll out a faster network and improve pricing.

Tarifica’s Take

Japanese internet and telecom giant SoftBank completed its acquisition of Sprint—the U.S.’s third-largest mobile operator—in July 2013, paying $21.6 billion for a 78 percent stake (it now owns 80 percent). Chairman Son entered the U.S. mobile market with an aggressive attitude, fortified by his belief that Sprint can only be a truly effective competitor with AT&T and Verizon if it combines forces with T-Mobile, the smallest of the four major operators. T-Mobile executives have spoken favorably of the potential deal—CFO Braxton Carter said this week, before Son made his remarks,  that “to take a third-scale national player that has the scale benefits with the right business model could be very competitively enhancing in the U.S.” (Deutsche Telekom CEO Tim Hoettges, for his part, said that while DT is open to the possibility of a deal, “at the moment we have no difficulties to run T-Mobile US on a stand-alone basis.”) As for the eventuality of a merger with Sprint, Carter added, “It is not a question of if, it is a question of when.”

That sense of inevitability, however, is at odds with the recent history of U.S. regulatory attitudes toward consolidation in the mobile industry. In 2011, a $39 billion bid by AT&T for T-Mobile was quashed, and in the time since, regulators have argued that T-Mobile’s position has strengthened, indicating that the market can indeed support four major carriers. The U.S. Justice Department and the FCC have so far taken a skeptical stance toward the idea of Sprint acquiring T-Mobile, so Son will have an uphill battle, to say the least.

In addition to arguing that the merger would foster a more competitive environment and thereby lower prices, Son also claims that it would lead to better technology for consumers. That would, presumably, be due at least in part to the ability to spend more on developing network infrastructure. In addition, a larger number-three operator would be better able to compete with AT&T and Verizon for spectrum in auctions. Whatever the possible advantages to the operators and to consumers, whether or not Son’s plan to launch a “massive price war” against the two top U.S. operators can be enacted will depend on whether regulators can be convinced that the merger will increase, not decrease, competition.