There was a distinct sense of déjà vu on reading reports that Sprint might, yet again, dodge a merger with T-Mobile USA, and instead team up with one or more cablecos, most likely the largest ones, Comcast and Charter. Sprint has flirted with the cable operators for over a decade, and the logic for a tie-up remains as strong as ever. But is it likely that a deal now would fare better than the joint venture between these parties over a decade ago?
In 2005, Sprint formed a $200m joint venture, Pivot, with four cable operators – Comcast, Cox, Time Warner Cable and BrightHouse (the last two now part of Charter). This included MVNO agreements, cross-marketing arrangements and grand plans to move towards quad play services which could be offered on a national basis harnessing Sprint’s mobile network and the cablecos’ different wireline footprints and content deals.
In a similar timeframe, there were other cooperations which could have strengthened the combined platform and created quad play services in the US long before these appeared – beyond simple single-bill arrangements – in most of the world. There was a joint SpectrumCo which bid in the AWS auction. Comcast, TWC and BrightHouse were investors, along with Sprint and Google, in Clearwire, the WiMAX-based start-up which aimed to build out wireless broadband to disrupt the telcos. Sprint then acquired Clearwire and briefly seemed to have the makings of a fixed/mobile 4G platform before LTE was in the market.
But then WiMAX became a technology dead end as the LTE juggernaut moved into action, and Sprint exited SpectrumCo and eventually sold out to Softbank. The cablecos sold their spectrum to Verizon and transferred their MVNO relationships to that operator too. Sprint was left running to catch up with the larger MNOs, and then lost its number three spot in the market to T-Mobile, helping to spark rumors that the two companies would merge.
TMO – whose proposed mergers with both AT&T and then Sprint were foiled by regulatory hostility – has been rejuvenated under the CEOship of John Legere, with his series of Uncarrier deals. By contrast, Sprint is still singing the same tune as it was in the WiMAX days. It continues to promise the most advanced 4G network, taking advantage of its plentiful 2.5 GHz spectrum to deliver large amounts of capacity and keep data unlimited. But the network build program has been beset by delays and results have been slow to filter through to financial performance, despite the proppings-up of parent Softbank.
No wonder, then, that Softbank chairman Masayoshi Son was said, earlier this year, to be willing to sell Sprint in order to be cleared to buy TMO.
The change of US government suggested, however, that he might be able to get both, if the regulatory climate around M&A became more relaxed than it was when he previously backed away from talks with TMO because a deal looked likely to be blocked as AT&T’s earlier bid for the smaller MNO had been.
But now, The Wall Street Journal reports that Son has agreed a two-month period of exclusivity to hold talks with Charter and Comcast about possible partnerships. These, the WSJ’s sources indicate, could take a variety of forms, but would almost certainly stop short of full merger.
One possibility sounds very like the web of arrangements in the Pivot era. The WSJ suggests that the two cable operators might take an equity investment in Sprint, which would ease the burden of its finances on Softbank, while also investing in Sprint’s network, on which, in return, they would get to launch a mobile service under a shared brand.
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