By Austin McLendon, Marketing Manager at Tower Point Capital
A merger could be within reach under a Trump Presidency putting some cell site locations at risk for consolidation.
Since President-elect Donald J. Trump won the general election in November, talks and speculation of a possible merger has spread across the telecommunication industry. Stock prices of Sprint and T-Mobile have increased and tower companies’ stocks, such as SBA and American Tower, have decreased. With a Republican in The White House, most expect a Trump administration to be more lenient and laissez-faire in regards to the oversight of mergers and acquisitions. With the market movement and a merger-friendly administration, 2017 is expected to be a year of change and uncertainty according to many wireless industry analysts.
In 2012, AT&T attempted to takeover T-Mobile, and in 2014, Sprint placed a $32 billion bid for T-Mobile. Both merger attempts were unsuccessful due to its unpopularity with the Democratic-led FCC under President Obama. Sprint’s parent company, SoftBank, was quoted in August of this year saying they are still interested in merging. On December 6, after meeting with President-elect Trump, the SoftBank CEO announced his plans to invest $50 billion in the U.S. As a result, Sprint and T-Mobile’s stocks increased again.
Due to the election, market movements, and recent announcements, wireless industry experts are giving their predictions of what could happen in the New Year. T-Mobile CFO, Braxton Carter, said “It’s hard to imagine there’s not going to be more openness to consolidation.” In regard to SoftBank’s announcement of investing $50 billion in the U.S., a Bellevue-based wireless industry analyst, Chetan Sharma, said “It’s a smart move on SoftBank’s behalf. Opening up dialogue this early in Trump’s administration sets SoftBank up for its next M&A move.” Sharma further predicted that Softbank will renew a proposal to acquire T-Mobile in a matter of weeks, not months.
A merger between Sprint and T-Mobile will shake the entire industry. Change will be felt from the consumers to the tower companies. Substantial decommissioning is a common theme after a telecom merger occurs. In 2013, when T-Mobile acquired Metro PCS, T-Mobile decommissioned 10,000 of 12,500 Metro PCS sites due to redundant cell coverage. Similar consolidation occurred during the mergers of Sprint and Nextel, Verizon and Alltel, and AT&T and Cingular. According to the Managing Director of TowerPoint Capital, “We are experiencing all the historic signs of a near term merger or acquisition. The stock price of the carriers that are being targeted are up and the stock prices of the tower companies are down.” In addition to a Republican administration, starting a telecom merger could be within reach in the near future.
January 5, 2017