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Sprint puts T-Mobile talks on hold to negotiate with cable duo, report says

Five things to know about Sprint’s future

A federal ban on merger talks in the telecom industry ended late in April which might mean a merger between Sprint and T-Mobile. This video includes footage from Sprint and photos from Bloomberg Gadfly and Bloomberg.
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A federal ban on merger talks in the telecom industry ended late in April which might mean a merger between Sprint and T-Mobile. This video includes footage from Sprint and photos from Bloomberg Gadfly and Bloomberg.

Sprint has put merger talks with T-Mobile US on hold to pursue two months of exclusive talks with cable giants Comcast and Charter Communications, according to a published report.

In a story published Monday night, The Wall Street Journal cited sources it did not identify to say that the two-month window runs through late July, suggesting that Sprint’s cable talks have been underway for about a month.

Its report said Sprint chairman Masayoshi Son is engaged in the talks with the cable companies. Son founded and heads Tokyo-based SoftBank Group, which owns more than 80 percent of Overland Park-based Sprint’s shares.

Sprint spokesman Dave Tovar declined to comment Monday evening.

Comcast and Charter had agreed in May not to pursue negotiations with other companies without the approval or participation of the other as each explores the possibility of entering the wireless industry. Comcast already has plans to launch wireless service using Verizon’s network under an agreement the companies struck several years ago.

According to the Journal’s report, the cable companies are considering investing in Sprint’s network to improve its performance. The cable companies would receive “favorable terms” to offer their own wireless service on Sprint’s network as part of the arrangement, it said.

Sprint and the cable companies also are considering another possibility in which the two cable giants would buy Sprint, though the Journal said its sources considered this a less likely alternative.

Such a purchase likely would reduce the jobs and other financial impact on the Kansas City area that would come from a merger of Sprint and T-Mobile.

Combining the two wireless networks, merging executive teams and work forces likely would favor T-Mobile, which has been far more successful than Sprint in racking up new subscribers over the last four years.

Sprint CEO Marcelo Claure and T-Mobile executives have talked openly about the financial benefits of merging the nation’s No. 4 and No. 3 wireless carriers. Estimates of $30 billion and $40 billion in payroll, network and other savings set a high hurdle for alternative arrangements to compete with.

Analysts, however, also have suggested that negotiating a deal to combine Sprint and T-Mobile itself would be complex and not certain to work out.

The Journal’s report cited unspecified sources to say the two wireless carriers’ talks have “remained far apart” on terms of a merger but that it may still be the most likely deal to happen.

Federal regulators would review a merger of the two carriers, and many analysts believe it would be difficult to win Washington’s approval.

Federal antitrust regulators previously blocked AT&T, the nation’s No. 2 wireless carrier, from completing a $39 billion purchase of T-Mobile six years ago. Sprint made a run at a T-Mobile deal three years ago but stopped short of seeing approval in the face of almost certain rejection by Washington.

Sprint may be talking with the cable companies because of the uncertainty of regulatory approval of any deal with T-Mobile.

“Trying to reduce the number of competitors is not only an issue regulatorily, it’s also something that would really hurt the marketplace,” said Berge Ayvazian, an industry consultant with Wireless 20/20 .

Ayvazian said Sprint also may be able to find value in a cable connection because of the unique value of a wireless offering bundled with cable and internet service that Charter and Comcast could provide and that At&T and Verizon have been working to achieve.

The Journal’s report said John Malone, who controls Charter’s largest shareholder Liberty Broadband, is pressing Comcast CEO Brian Roberts to consider jointly buying a wireless carrier such as Sprint. It said Roberts prefers to strike a better wireless network agreement, like the one it has with Verizon, but on better terms, the Journal said.

Mark Davis: 816-234-4372, @mdkcstar

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