Report says Sprint and T-Mobile merger is in trouble, but company leaders disagree

Sprint CEO addresses employee question: ‘What’s going to happen to Sprint?’

Sprint's new CEO Michel Combes helped kick off day two of Sprint's "Why Sprint Now" road show at the Sprint Center in June.
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Sprint's new CEO Michel Combes helped kick off day two of Sprint's "Why Sprint Now" road show at the Sprint Center in June.

Sprint and T-Mobile have been told by Justice Department officials that their proposed $26 billion merger is unlikely to be approved, the Wall Street Journal reported Wednesday, citing anonymous sources.

But Marcelo Claure, Sprint’s executive chairman, said the report was not accurate.

“We continue to have discussions with regulators about our proposed merger with @TMobile,” Claure said in a tweet. “That process is ongoing and we have no further comment.”

Sprint officials referred questions to Claure’s tweet.

John Legere, T-Mobile chief executive, also disputed the story.

The Wall Street Journal report said that Justice Department officials had concerns that combining the nation’s third- and fourth-largest wireless companies would amount to an “unacceptable threat to competition.”

The Justice Department, which evaluates corporate mergers on the basis of seeing whether a resulting company would pose antitrust concerns, has been leery of recent attempts to combine the four remaining major wireless carriers in the United States.

In 2011, AT&T abandoned a bid to buy T-Mobile after it realized it was facing tough scrutiny from the Justice Department over antitrust concerns.

The Wall Street Journal’s report also indicated that Justice Department staff questioned whether the combined company would result in the efficiencies that Sprint and T-Mobile have championed since the proposed deal was announced last year.

On April 29, 2018, both companies said they were pursuing an all-stock transaction that would create a combined $146 billion company.

Both companies said a combination would allow the new wireless concern to compete with its larger rivals, AT&T and Verizon, as well as quickly deploy a 5G network for its customers to enjoy faster download and streaming speeds.

In announcing the deal, Sprint attempted to allay concerns about jobs and the company’s future in Overland Park where it has its headquarters. The combined company would keep a secondary headquarters in Overland Park.

Since the merger was announced, Sprint has told regulators that scuttling its deal with T-Mobile would have grave consequences for the company’s future.

On April 2, Sprint chief executive Michel Combes sent a letter to Federal Communications Commissioner Geoffrey Starks outlining a bleak future for Sprint without a deal with T-Mobile. Combes said that absent a merger, Sprint lacked the resources to aggressively compete against its rivals.

“Without the merger, Sprint will continue to struggle,” Combes said, adding that Sprint has had to make deep cuts to its workforce to reduce operating expenses as the company has lost $25 billion over the last decade.

Sprint employed 43,000 nationally in 2010. That figure is down to 28,000 today, according to Combes. About 6,000 work at Sprint’s headquarters in Overland Park.

“Without the merger, the trajectory for Sprint will worsen and Sprint’s prospects will be limited,” Combes’ letter continued. “Sprint will be forced to further reduce its operating expenses, which means more job reductions in Kansas City and throughout the company, and our future as a stand-alone company will be in jeopardy.”

Combes’ letter was in response to Starks’ comments to The Star about the merger published in March. Starks, one of two Democratic appointees on the five-member FCC board and a native of Johnson County, told The Star that he would be considering the merger’s impact on jobs.

Sprint shares were down 5% in mid-morning trading after the publication of the Wall Street Journal story. T-Mobile shares fell 3%.

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Steve Vockrodt is an award-winning investigative journalist who has reported in Kansas City since 2005. Areas of reporting interest include business, politics, justice issues and breaking news investigations. Vockrodt grew up in Denver and studied journalism at the University of Kansas.