With a Trump Administration, Sprint Could Renew Pursuit of T-Mobile USA

Questions about how Donald Trump will govern abound. However, the new administration presents at least the possibility for Sprint (S) chairman and backer Masayoshi Son to realize his vision of merging the wireless carrier with T-Mobile USA (TMUS) .

Sprint pursued a deal with T-Mobile in 2013 and 2014. The Obama administration pushed back against a transaction that would reduce the number of national wireless carriers to three from four, despite Son's arguments in the media that Sprint could be a stronger competitor to Verizon (VZ) and AT&T (T) . Sprint eventually dropped the matter.

With Trump's victory, the stock gained more than 13% to close at $7.11 on Wednesday and during the day set a 52-week high of $7.20. Shares pulled back 3 cents to close at $7.08 Thursday.

A Clinton administration could have taken a tougher stance than Obama's regulatory regime, Evercore ISI Head of Political Analysis Terry Haines said, because of pressure from Sen. Bernie Sanders and Sen. Elizabeth Warren.

"What you'll have with a Trump Justice Department, with oversight from a Republican House and Senate, is one where merger and acquisition activity will be viewed in a more holistic manner," Haines said, acknowledging that specifics about policy are unclear given that we don't even know who will be Attorney General. Sprint and T-Mobile could argue that the deal would benefit consumers by providing a stronger challenger to the big two carriers, he suggested, even tough it would remove a competitor from the market. "That's a big change," Haines said.

A sale of Sprint would be large. The telecom has a $27.8 billion market cap and would carry a total valuation of about $60 billion when including its net debt.

The transaction could appear moderate, however, when viewed next to AT&T's proposed acquisition of Time Warner (TWX) , which comes to nearly $109 billion when including assumed debt. Moreover, merging AT&T and Time Warner would combine one of the world's premiere content portfolios with a dominant wireless and satellite TV provider. While Sprint and T-Mobile USA are taking customers from AT&T and Verizon, they remain the bottom two wireless providers.

"The horizontal issues raised by a Sprint/T-Mobile merger seem relatively pedestrian compared to the imaginative parade of horribles envisioned in the vertical AT&T/TWX combination," Craig Moffett of MoffettNathanson Research wrote in a late-October research note, after Sprint reported third-quarter earnings. "In short, the odds a [Sprint-T-mobile] deal just went up."

Sprint and T-Mobile declined to comment.

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