Any merger deal between Sprint (NYSE: S) and T-Mobile (NASDAQ: TMUS) was always going to face major challenges. Aside from the regulatory hurdles the two companies would have to leap, there were issues of control -- and those may be what stops this latest attempt at a deal from happening.

The problem -- and it's only one of many -- is that SoftBank CEO Masayoshi Son, whose company owns the large majority of Sprint shares, wants to retain some control over the merged company. That makes little sense for T-Mobile majority owner Deutsche Telekom, which has done just fine with John Legere running its wireless carrier.

What went wrong?

Sprint needs a deal more than its rival. The No. 4 U.S. wireless carrier has $38 billion in debt, and a merger could bring as much as $30 billion in savings, Reuters reported.

In addition, both companies would benefit from combining their spectrum holdings and back-end operations. Of course, none of that would be easy since they operate on different technical standards. They also use different pricing schemes, which would make combining the brands without subscriber loss a major challenge.

The biggest issues, aside from obtaining regulatory approval, may well have been valuation and control. It has been reported that T-Mobile did not offer much premium -- if any -- over Sprint's current stock price. In addition, it's hard to picture a scenario where Legere, who would be in heavy demand were he to become available, would willingly share power with Son.

What happens next?

Until Sprint gets sold or merges with another company, this is a never-say-never deal. Assuming that, as reported, the parties have walked away from the table, Son's wireless carrier is likely to discuss a sale or partnership with a number of different cable companies. It may also look to as-yet-unmentioned global partners looking for a bigger U.S. footprint.

Worth noting, it remains unclear if a T-Mobile/Sprint deal could get past federal regulators, but the entrances of Comcast and Charter into the wireless space may change the anticompetitiveness equation.

What is clear though is that even if this round of talks is dead, negotiations between Sprint and T-Mobile always remain a possibility. Such a merger makes sense when it comes to creating a company with the scope to rival AT&T and Verizon, and that is a strong force pressing these two companies back toward each other.

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The author(s) may have a position in any stocks mentioned.


Daniel B. Kline has no position in any of the stocks mentioned.

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