Sprint is reportedly trying to merge with cable giant Charter Communications. According to Bloomberg, Charter is less than enthusiastic about the proposed deal, but talks are continuing between the two companies. Earlier this summer, Charter and its biggest rival Comcast signed a joint agreement with Sprint, which gave them exclusive rights to discuss a merger with the carrier. That agreement expired in late July, and Comcast CEO Brian Roberts said that he does not see a pressing need to enter the U.S. wireless market, which he called “a tough business.”
The U.S. wireless market has indeed been a tough business for SoftBank, which purchased a controlling interest in Sprint in 2013, the same year T-Mobile US launched its “uncarrier” campaign. Since that time, T-Mobile US has replaced Sprint as the nation’s number three carrier based on subscribers. Sprint’s efforts to match T-Mobile’s aggressive pricing plans have hurt the bottom line and left Sprint with little to invest in its network after servicing its $35 billion debt load. SoftBank chairman Masayoshi Son is widely believed to be looking for a deal as way to bolster Sprint’s balance sheet as the company deploys new infrastructure to leverage its vast spectrum portfolio.
Could Charter be Sprint’s savior? The cable company’s largest shareholder, John Malone, is said to be interested. But Malone controls less than 25% of the company.
Charter has already reportedly said no to one merger proposal from a wireless carrier. Earlier this year, the New York Post reported that Charter had rejected a buyout offer from Verizon Communications. That offer was said to be over $100 billion, but not high enough to suit Charter. Chater has a market value of $113 billion and just under $60 billion in long-term debt. A buyout of Charter would be a big stretch for Verizon, which has already made several major acquisitions in recent years, and continues to devote more than 75% of its net income to shareholder dividends.
The Wall Street Journal, which was the first publication to report Sprint’s interest in merging with Charter, said the proposal would create a new public company controlled by SoftBank. Bloomberg further stirred the pot by reporting that the companies may want to combine and then pursue an acquisition of T-Mobile US.
A combination of Sprint and T-Mobile US is thought to have been Son’s original goal in buying Sprint. The Obama Administration was apparently not ready to approve such a deal, but the Trump Administration might be more compliant.
