Commentary

Sprint Talks Bundling With Comcast, Charter; Puts T-Mobile On Hold

The race to make a deal with T-Mobile has been a long jog for Sprint, and now it is setting off to explore a side path — a possible deal with Comcast Corp. and Charter Communications that would enable the cable companies to bundle wireless services to customers.

After dropping its pursuit of T-Mobile in 2014 and subsequently engaging in a Twitter-fed war of disparagement and prices with T-Mobile CEO John Legere, rumors of discussions between Sprint parent Softbank and its rival surfaced again last month. 

Just last week, Sprint CEO Marcelo Claure told CNBC’s “Halftime Report” that “a combined T-Mobile-Sprint could pose a ‘powerful’ threat to telecom giant AT&T, following a tech leader’s meeting with President Donald Trump at the While House,” Berkeley Lovelace Jr. reports for CNBC.com.

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“We have looked at every other alternative to make sure we are making the right decision,” Claure said then. “If the government works to allow us to combine, we'll be No. 3, but we’ll be a formidable competitor and we’ll continue to disrupt the industry.”

Some antitrust experts warn that it would be a mistake for the DOJ and FCC to allow such a deal to go through, however.

“Ensuring that competition works to consumers' benefit makes policing mergers among competitors a priority that transcends party and politics. Without it, you pay the price,” wrote Bill Baer, former assistant AG for the antitrust division of the DOJ, and Tom Wheeler, former chairman of the FCC, in a commentary on CNBC about the renewed merger talks.

In any event, now “Sprint chairman Masayoshi Son and the cable firms have entered into a two-month, exclusive agreement for discussions through late July, putting merger talks with T-Mobile US on hold,” sources “familiar with the matter,” told the Wall Street Journal’s Shalini Ramachandran, Ryan Knutson and Dana Mattioli late Monday, setting off much speculation. 

“One arrangement that has been considered is for Charter and Comcast to invest in improving Sprint’s network in exchange for favorable terms to offer wireless service using the carrier’s network,” the sources tell the WSJ. Although they “already have a network-resale agreement with Verizon, the Sprint deal could provide much better terms.” 

Should a deal transpire, the cable guys “will probably promote a bundle of wireless, cable and Internet services that would be cheaper than buying each service separately. But not everyone wants to buy a bundle, and the companies would have more power to raise prices down the road,” writes Cecilia Kang for the New York Times.

“Like most of these tie-ups, this is an agreement that investment bankers might love but Internet users don’t need,” Matt Wood, a policy director at consumer interest group Free Press, tells Kang. “They don’t want forced bundles.”

The hometown newspaper sees the positives in the possibilities for a local employer.

“Sprint took on some shine Tuesday after news it’s in talks with a pair of cable companies, an alternative from years of predictions that it was headed toward a job-robbing merger with rival T-Mobile US,” write Mark Davis and Steve Vockrodt in their lede for the Kansas City Star.

Bloomberg “Gadfly” columnist Tara Lachapelle, on the other hand, sees the negatives.

“Sprint Corp. is proving more desperate than we thought,” she writes. “Rather than continue down the road to a logical — and until now, inevitable — strategic merger with T-Mobile US Inc., the struggling wireless carrier has put that plan on hold in favor of what looks like a financial salve. It may say more about Sprint's weakness than investors buoyed by Tuesday's share-price rally would like to admit.”

To wit: “Sprint is negotiating with two far more powerful companies that will use its network to their advantage and may not even make an accompanying equity investment in the company,” Lachapelle observes.

Indeed, “how the game plays out could have a big impact on the U.S. telecom landscape in multiple respects. One thing is for sure, though: Sprint has a relatively weak hand to play, and the companies it’s talking with know it,” Eric Jhonsa writes for TheStreet’s “Real Money” column. “If there was ever at time for Masayoshi Son to prove that his reputation as a great dealmaker is justified, this is it,” Jhonsa concludes.

Son has more than that to prove. The 50,000 jobs he promised Trump he would deliver to the U.S. are still in transit.

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