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Cable guys' Sprint lurch bound for crossed wires
June 27, 2017 / 3:48 PM / 6 months ago

Cable guys' Sprint lurch bound for crossed wires

NEW YORK (Reuters Breakingviews) - A lurch by U.S. cable giants Comcast and Charter Communications into mobile telephony is bound for crossed wires. The two dominant operators are in talks with wireless carrier Sprint that may include a range of options from the use of airwaves to an outright acquisition. Wherever they end up, a ménage-à-trois involving moguls John Malone, Brian Roberts and Masayoshi Son is likely to be ungainly.

SoftBank Corp. Chief Executive Masayoshi Son speaks as the logo of their U.S. unit Sprint is backgroud in Tokyo May 11, 2015. REUTERS/Issei Kato

How these three got to this point is all a bit odd. For starters, the Wall Street Journal reported on Monday, Sprint entered into a two-month exclusive period for negotiations with Charter, controlled by Malone, and Comcast, led by the Roberts family. Sprint’s shares popped 6 percent on Tuesday morning.

Charter and Comcast are currently bound by an unusual pact formed in May to jointly expand their cellular ambitions. The partnership prevents either from making a material investment or acquisition in a wireless outfit without the other’s consent for a one-year period. Comcast rolled out a mobile initiative in April using Verizon’s network while Charter has similar designs.

Meantime, Son, who controls Sprint though Japanese conglomerate SoftBank, has been agitating to do a deal for ages, starting by merging Sprint with T-Mobile US. They are the No. 3 and No. 4 mobile carriers in the United States, and have been locked in battle over the price-conscious clients of rivals AT&T and Verizon.

However their discussions proceed, it’s hard to imagine the three alpha executives easily coming to any agreement. Malone is known for whipping up devilishly complex structures that unusually involve a maze of tracking stocks and holding companies. Malone is trying to convince a skeptical Roberts to buy the troubled Sprint, valued at $65 billon with debt, the Journal reported.

Roberts, though, could be tempted by the cost savings a deal would bring. New Street Research reckons as much as $6 billion can be shed annually in network operating and capital expenses. Taxed at roughly 35 percent and capitalized, the present value of savings could reach nearly $40 billion.

With a potential windfall like that on the horizon, even the oldest of dogs might be convinced of a three-headed trick.


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