Will Sprint and T. Mobile U.S. Ever Find Common Ground?

The Wall Street Journal reported on April 10 that

Our thesis for years has been that on their own, the two companies are too small to compete long term against Verizon and AT&T due to the significant cost advantages the two bigger firms have from their significantly larger subscriber bases. Wireless networks are expensive to build and maintain. Those fixed costs can be spread over a much larger customer base by Verizon and AT&T. Despite T-Mobile’s success over the past four years it still has less than half the subscribers of the bigger two and lower EBITDA margins. By combining T-Mobile and Sprint the companies would gain scale similar to AT&T and Verizon. However, regulators like the aggressive nature of smaller players with T-Mobile being the global poster child for such activities, so even if the two companies reach an agreement there is no assurance regulators will approve the deal. We think the odds of a successful deal remain low.

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.