There is a Way For Sprint and T-Mobile to Join Forces – If they Still Want To

by Istvan Fekete on September 23, 2015

Sprint and T-Mobile’s argument wasn’t strong enough last year to convince US regulators to allow them to merge; hence the majority of analysts say it would be better for them to wait until 2017 to resume merger talks. But analysts of Evercore ISI think differently: They believe the two carriers could join forces by combining their respective network resources into a new company.

The analysts – Jonathan Schildkraut, Robert Gutman, Justin Ages, and Michael Hart – issued a research note (obtained by FierceWireless) saying that the creation of a new wireless player combining network assets from both Sprint and T-Mobile would have several benefits, such as: t “would allow for (1) increased network investment, (2) faster speeds on the back of a deep spectrum portfolio, and (3) a reduction in network costs (both S and TMUS spend too much given a lack of scale) — while maintaining, or improving, the competitive options for consumers.”

“At the same time, investors of both companies should benefit from stronger [free cash flow] — though we acknowledge carriers’ strong desire to maintain their own network and to differentiate from competition on this front,” they added.

The legal form would be a Real Estate Investment Trust, a new company which would own or finance income-producing real-estate. The company would be named “NetCo”, and the participating carriers would rent network capacity from it.

Other benefits from such a partnership would be a much larger amount of spectrum controlled by the country’s leading carriers, AT&T and Verizon. Although the majority of the 255 MHz of spectrum “NetCo” would control is higher band, the company could acquire a better balance of low-band spectrum through swaps and/or acquisitions.

The merger would decrease the number of national carriers to three, but both Sprint and T-Mobile could keep their brand, so theoretically the four competitors would remain. As for investors, they would essentially maintain their ownership, but the deal could add more value, the analysts argue.

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Written by: Istvan Fekete. Follow by: RSS, Twitter, Facebook, or YouTube.

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