Sprint, T-Mobile Merger Talks Edge Closer but Still Drag On -- Update

By Ryan Knutson Features Dow Jones Newswires

Sprint Corp. and T-Mobile US Inc. both took the unusual step of canceling their earnings calls this week to avoid questions about their potential merger, a move seen by many as a sign the companies are close to announcing an agreement.

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Yet despite months of talks, there is still no final deal in hand, according to people familiar with the matter. An agreement to combine the nation's third and fourth largest cellular carriers by subscribers could be announced within the next few weeks, the people said, though it could also still fall apart.

Broad outlines of the deal are largely settled, the people said: The transaction will be all-stock, and T-Mobile parent company Deutsche Telekom AG will have control over the combined company. T-Mobile Chief Executive John Legere will run the combined company. Sprint Chairman Masayoshi Son will be co-chairman of the board along with Tim Höttges, the CEO of Deutsche Telekom.

In an unusual twist, the deal will have no cash breakup fee, the people said. Instead, if the deal is blocked by regulators, T-Mobile would have to give Sprint an attractive roaming deal so Sprint's customers can connect to T-Mobile's towers where Sprint doesn't have coverage, the people said.

The companies are now working on business and network integration plans and preparing arguments for what is certain to be intense antitrust scrutiny in Washington. "Haggling over an agreement is over," said one person close to the deal.

Shares of Sprint, which closed Tuesday at $7, have fallen roughly 10% in the past month as it became clear the deal wouldn't carry much, if any, of a premium for the company's investors. The company has a market value of $28 billion. T-Mobile, whose shares are down 3% in the past month, has a market value of about $51 billion.

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Details of the talks have been widely reported all year, calling to mind the situation in 2014, when Sprint was poised to acquire T-Mobile. But the acquisition was never consummated; the companies backed down in the face of regulatory opposition.

With a Republican administration now running Washington, the carriers are more confident a deal will be approved. But many analysts put the odds around 50%.

Rather than risk saying anything that would upset the potential deal, executives at both carriers released prepared statements instead of taking questions from analysts this week.

"For obvious reasons, given the noise in the media and in the market about potential strategic opportunities for Sprint, we are taking a nontraditional approach to sharing our results with you this quarter," Sprint CEO Marcelo Claure said in a written statement posted on Sprint's website.

Both Sprint and T-Mobile reported earnings with few surprises, as T-Mobile continues to outperform Sprint.

In the three months ending Sept. 30, Sprint added 168,000 postpaid subscribers, down from 344,000 additions a year earlier. Monthly cancellations, or churn, edged up to 1.72% from 1.52% a year ago. Sprint's net loss narrowed to $48 million from $142 million last year. Sprint ended the quarter with about 54 million connections, including 31.7 million postpaid subscribers.

T-Mobile, which reported results Monday, added 817,000 postpaid subscribers in the quarter and had a $537 million profit. It ended the period with about 70.7 million customers, including 37 million postpaid subscribers.

It has been a relatively quiet season in the wireless industry, with most customers choosing to hold on to their old handsets instead of upgrading to a new device. Both Sprint and T-Mobile, which have been known for aggressive discounts, have been less promotional with the latest devices from Apple Inc. and Samsung Electronics. Analysts expect choppier results after Apple starts selling its high-end iPhone X next month.

Drew FitzGerald and Dana Mattioli contributed to this article

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

(END) Dow Jones Newswires

October 25, 2017 11:36 ET (15:36 GMT)