Both Sprint CEO Marcelo Claure and T-Mobile US CFO Braxton Carter talked about the potential synergies of a merger in separate discussions during the J.P. Morgan Global Technology, Media and Telecom Conference yesterday in Boston, Mass.
In separate discussions at the event, both Claure and Carter agreed that analysts were low-balling the potential synergies of a merger with estimates of $30 billion, with Carter saying that the number ” may be conservative” and Claure commenting that a synergy number from a Sprint/T-Mobile US merger would be “much larger, in our opinion.”
Carter said that while T-Mobile US continues to have “a great standalone path to value creation,” he said that after the lengthy 600 MHz quiet period during which a merger could not be discussed, the two companies “will certainly have full discussions.”
One of the benefits of a Sprint transaction would be combining and rationalizing of two networks into one, Carter said. In particular, he noted that the combined network would have “tremendous density,” and when Sprint’s 2.5 GHz holdings were taken into account for 5G deployment, a merged company would be able to “avoid more capex in the future” than either company could do on its own — however, he estimated that it could cost up to $10 billion to get to full integration.
Claure said that Softbank Chairman and CEO Masayoshi Son is similarly focused on shareholder value.
“Obviously, he owns 85% of the company, so he is looking in terms of what’s going to generate the highest return,” Claure said, adding that “we look at deals very different[ly]” but that Sprint also likes consolidation.
“We have evaluate in terms of what’s better for Sprint,” Claure said. “The good thing is, we have a five-year turnaround plan. We are executing exactly as we had forecasted, so we feel very good on the future of Sprint. However, when you look at potential opportunities — doing a deal with another carrier like the usual suspect — when you look at what can be done, it’s pretty amazing if you think about having a company almost the size of AT&T and Verizon in which you combine the two mavericks … The synergies are pretty interesting.”
Claure also said that a potential cable company merger would have “similar synergies”, particularly if more than one cable company were involved. He added that a cable company combination would have both traditional operating synergies and network synergies, which he added “are quite relevant when you are going to build the 5G networks, in terms of infrastructure the cable companies have.”
“We need to do a deep dive. … But there is a very significant value creation opportunity,” Carter said, and the merger could “supercharge” T-Mobile US’ growth compared to its future as a solo wireless player.
“It’s not rocket science,” Carter said. “We need to buckle down, see if there’s a way to check all the boxes at this point, and if there is, we’ll be very interested. … But there has to be significant value creation for our shareholders as well as the Sprint shareholders, and we’ll find that out.”
