Here's Why A Sprint/T-Mobile Tie-Up Is Such A Big Deal

Various media reports suggested last week that Softbank, the parent company of Sprint Corp S, may approach T-Mobile US Inc TMUS's parent company Deutsche Telekom over a potential tie-up.

In a research report on Tuesday, Goldman Sachs' Brett Feldman suggested that a potential combination of Sprint and T-Mobile will create an entity with two to three times the amount of spectrum per subscriber versus its peers AT&T Inc. T and Verizon Communications Inc. VZ. In fact, the analyst noted that this would represent a "material capacity advantage" that will allow the combined entity to steal market share by offering superior pricing.

Feldman added that the combination will result in one fewer mobile operator in the competitive landscape, but it could actually boost the overall competitiveness of the sector. Moreover, the size of a combined Sprint/T-Mobile (99.8 million combined subscribers) will make it a "much formidable challenger" to the market leaders Verizon (114.2 million subscribers) and AT&T (91.3 million subscribers).

Not So Fast

Feldman continued that the regulatory approval of a Sprint and T-Mobile merger will be challenging, even under President Donald Trump's administration that is perceived to be more business friendly.

Feldman justified his view based on industry legal experts who argued that the Federal Communications Commission and Department of Justice feel "vindicated by the increase in wireless competition" after resisting the failed 2011 combination of T-Mobile and AT&T.