Charter Snubs Sprint On Deal -- WSJ

By Ryan Knutson Features Dow Jones Newswires

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 31, 2017).

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Charter Communications Inc. said it isn't interested in buying Sprint Corp., rebuffing a gigantic merger offer and potentially ending several weeks of deal talks between the media and communications companies.

While the announcement could effectively kill the possibility of a deal between Sprint and Charter any time soon, a person familiar with the matter said Sprint Chairman Masayoshi Son may still decide to make a formal offer to acquire Charter anyway.

Sprint proposed a merger with Charter that would create a massive new entity controlled by SoftBank Group Corp., Sprint's parent, The Wall Street Journal reported Friday.

On Sunday, Charter rejected the merger idea and indicated it would stick with an existing wireless reseller agreement with Verizon Communications Inc. -- known as an MVNO pact -- rather than switch to one with Sprint.

"We understand why a deal is attractive for SoftBank, but Charter has no interest in acquiring Sprint," Charter spokesman Alex Dudley said in an emailed statement. "We have a very good MVNO relationship with Verizon and intend to launch wireless services to cable customers next year."

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Charter has influential investors, including Liberty Broadband Corp., which is controlled by cable mogul John Malone. Mr. Malone has been interested in a wireless deal.

Sprint entered into exclusive talks with Charter and Comcast Corp. in late May about an array of deal possibilities including one that would allow Comcast and Charter to offer wireless service under their own brands using Sprint's network, people familiar with the matter have said.

Also on the table was a potential investment in the wireless carrier from the cable companies, people familiar with the matter have said.

The exclusivity ended last week, but Sprint and Mr. Son, who is also SoftBank's chairman, continued to pursue a full combination with Charter, the people said. Together, the companies have a market value exceeding $130 billion, though Charter, worth roughly $100 billion, is much bigger than Sprint.

Comcast has made clear it wasn't interested in participating in any merger with Sprint. The telecommunications company is free now to resume merger talks with rival T-Mobile US Inc., which it had held earlier this year. Sprint shifted to the talks with the cable companies when discussions with T-Mobile, which have been on and off for years, hit an impasse, people familiar with the situation said.

T-Mobile has also made public statements lately indicating it is in no hurry to strike a merger, as the carrier has been adding new customers at a fast clip while also improving financial performance.

Sprint recently reversed years of subscriber losses but still hasn't turned profitable. It reports quarterly results on Tuesday.

The rebuff adds to the already high drama surrounding the cable, telecom and media industries, which are jockeying for position as consumers spend more time watching video and surfing the web on smartphones. AT&T Inc. is awaiting approval for a proposed $85 billion acquisition of the content company Time Warner Inc.

Comcast Chief Executive Brian Roberts said on an earnings call last week that he was happy with his current business units, including cable, content and theme parks, all of which show healthy growth.

The wireless industry, meantime, is under great pressure, as there are more active cellphones in America than people. Carriers have resorted to price cuts and bigger data allowances to win a smaller pool of available subscribers.

The competitive pressure in the wireless business that gives carriers motivation to consolidate has been a boon for consumers, who have recently seen prices fall. The consumer-price index for wireless service saw its largest fall ever earlier this year, according to the Labor Department.

The wireless industry is also poised for another major technology cycle to fifth generation, or 5G, technology, which will require significant investment. T-Mobile and Sprint, the nation's third- and fourth-largest carriers by subscribers, respectively, have indicated that greater scale will help them invest in such technology, which their larger rivals are already working on.

Sprint isn't the only carrier to have an eye for Charter. Verizon also discussed a deal with the cable company earlier this year, but the talks didn't amount to anything.

Charter's rejection of Sprint is good news for Verizon, which currently carries wireless traffic from Comcast's new offer, called Xfinity Mobile, and the service Charter plans to launch in the coming months.

While such reseller deals don't typically bring in as much revenue as Verizon's own customers, they are still highly profitable connections.

Write to Ryan Knutson at ryan.knutson@wsj.com

(END) Dow Jones Newswires

July 31, 2017 02:47 ET (06:47 GMT)