On the plus side, it means that Sprint does not have to risk spending the next year lobbying regulators only to have a deal rejected. On the down side, Sprint has to come up with something in place of the $30 billion in savings and other benefits that the company expected from merging with T-Mobile.
Investors focused on the downside Monday as Sprint fell 11.5% to $5.90 while T-Mobile USA dropped 5.7% to $55.54. On Tuesday morning, shares of both were trading essentially flat.
"What's next for Sprint is what they should have done in the first place -- invest in their network and compete," said Roger Entner, founder of wireless consulting group Recon Analytics. "T-Mobile has a wonderful playbook for what Sprint should have done."
It doesn't hurt that Sprint has the richest sugar daddy of them all, Softbank Corp. (SFTBY) Chairman Masayoshi Son. The question now is how much Son will invest.
The Softbank founder spoke to the importance of Sprint and the U.S. market in an investor call on Monday. "If we give up the control of Sprint in such an important market, we would regret that in five years, 10 years," Son said. "And even though in a short term, Sprint share price or SoftBank's share price may drop, but still I would feel good about this decision which is to cease merger talks."
The election of Donald Trump a year ago seemed an omen of a deregulatory environment that would bless a merger of Sprint. In the end, the carriers and their shareholders could not come to an agreement on who would control the venture.
Son suggested that the Softbank Vision Fund's investments in ARM Holdings PLC, which is strong in the Internet of things, and OneWeb LLC, which provides satellite broadband service, will work in Sprint's favor. "ARM's IoT and OneWeb would make Sprint different from just a traditional communication business to absolute differentiator. And with that differentiator, we can gain more customers," Son said. Softbank said it will increase its 82% stake in the carrier, but without crossing the 85% threshold that would require it to tender for all remaining shares.
Don't look for Son to open the purse strings of the Softbank Vision Fund, however, which has raised $93 billion for global technology investors and aims eventually to have a total of $100 billion.
Meantime, Sprint is putting money into its network. The carrier said it plans to boost its capital expenditures from $3.5 billion to $4 billion to $5 billion or $6 billion annually in the medium term. Sprint CFO Tarek Robbiati told investors Monday that the company can tap $3.5 billion in debt through a vehicle backed by wireless spectrum licenses, but tempered expectations by adding, "this isn't the vehicle for SoftBank to participate."
Rather than a merger with T-Mobile, Sprint presented investors with a deal with Altice USA (ATUS - Get Report) in a Monday earnings call. Sprint will allow Altice to resell its service through a new mobile-virtual network operator, or MVNO, deal.
Sprint has been down this road before with cable operators. Back in 1994, Sprint joined with John Malone's Tele-Communications Inc., Comcast Corp. (CMCSA - Get Report) and Cox Cable to launch a service that would combine wireless with landline telephone and pay-TV. Sprint held 40% of the venture, with TCI owning 30% and the others having 15% stakes. The telecom has had other pacts with cable operators to buy wireless spectrum or to test new generations of wireless technology.
Prior deals with cable have not panned out, although Robbiati said Monday that Altice will allow Sprint to use its fiber network to carry traffic for its 4g networks and the next-generation 5g wireless broadband networks.
Sprint has more wireless spectrum than any carrier, so it makes sense of the carrier to use its excess capacity to carry traffic for cable operators. "Sprint's massive spectrum holdings allow it the capacity to be aggressive in the wholesale market," Moody's Investors Service analyst Mark Stodden wrote in a Monday note. "In turn, cable operators can help Sprint with greater scale and much needed network densification by leveraging their deep fiber assets and rights of way for antenna placements."
The pact with Altice is positive, but not $30 billion positive.
Sprint CEO Marcelo Claure played up the carrier's competitive position in Tweets on Saturday, echoing some of the themes that Masa Son would later discuss about the benefits of ARM and OneWeb.
"One of [Sprint's] CEO Marcelo Claure's (many) tweets on Saturday that was most interesting to us was he seemed to connect [S] to the Softbank Vision Fund. Recall -- this fund has $93B behind it," Jennifer Fritzsche of Wells Fargo Securities LLC wrote in a report. "So while we need to hear a lot more on this connection (#whatwillmasado)-- it is a point that cannot be totally ignored."
In lieu of a game-changing merger, news from Tokyo may often outweigh incremental improvements in the wireless market place.
"If the 80-plus percent owner of the company doesn't believe in Sprint," wireless consultant Entner asked, "why should anyone else?"