German telecom Deutsche Telekom is seeking to renegotiate the merger deal between its US subsidiary, T-Mobile, and rival Sprint, due to the latter’s underwhelming financial performance, according to The Financial Times.
This follows on the heels of the decision earlier this week in the protracted antitrust lawsuit against the proposed merger, which ruled in favor of T-Mobile and cleared the merger to move past one of its final hurdles.
For context, since the merger’s announcement in April 2018, Sprint has seen declines in both revenue and subscribers — at the end of Sprint’s fiscal Q3 2019 (ended December 31, 2019), the company reported subscribers losses for six straight quarters and posted the company’s fifth consecutive quarterly revenue net loss.
Despite these disappointing financial outcomes, Sprint’s controlling shareholder SoftBank opposes a renegotiation, which could risk drawing out the almost two-year-long merger process even further and negatively affect T-Mobile.
A further extension of the merger timeline could hurt T-Mobile’s growth plans, just as previous delays have already eaten into its business.
Merger uncertainty caused the carrier to pause network build-outs late last year. In August 2019, the carrier reportedly notified some of its wireless contractors that it would delay purchase orders for infrastructure and 5G upgrades until 2020, and hold off on new macrocell sites until the merger was approved. This unexpected delay likely affected contractors’ and suppliers’ trust in the telecom, and could result in fewer willing partners in the future.
The protracted merger also spurred an MVNO partner to jump ship, costing T-Mobile in revenue. The delays also hurt T-Mobile’s revenue streams last summer as MVNO Ting Mobile moved its services to Verizon’s network — the MVNO specifically cited the delays stemming from the merger and the inability of T-Mobile to offer lower rates based on combined infrastructure as the reasons for the move.
Further delays could stymie the build-out of T-Mobile’s nascent broadband service. T-Mobile launched the pilot of its LTE-based home internet service in March 2019, which it eventually plans to upgrade to 5G.
The carrier hopes to expand the service to cover over half of US households with 5G by 2024, pending its merger with Sprint. Without access to Sprint’s 5G holdings, T-Mobile’s timeline and 5G home internet strategy would likely need to be revised significantly, delaying the company’s larger entry into a lucrative market.
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Source:: Business Insider – Tech