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SunTrust Robinson Humphrey’s Greg Miller and his team take a look at the potential for a merger between Sprint (S) and T-Mobile (TMUS). Spoiler alert: They’re “highly skeptical.”
Miller writes that there seem to be leaks about a potential deal nearly daily, although he doesn’t expect anything to come out before an official announcement, which may happen as soon as third-quarter earnings. That said, he doesn’t think it will actually happen, as it will be very difficult to get such a deal by the Department of Justice, even if the Federal Communications Commission doesn’t object, hence Miller’s skepticism about a deal actually going through.
If it did manage to somehow get approval, a S-TMUS tie up would be an ” unambiguous positive event for the wireless industry,” i.e. AT&T (T), Verizon (VZ) and the new combined company, but a negative for the tower industry, including companies like American Tower (AMT), Crown Castle (CCI), and SBA (SBAC), which would see its pool of four major customers shrink to three. He warns that a deal could eliminate more than the 7%-8% of overlapping cell sites, and despite a “flurry” of initial activity, be a long-term headwind for the tower group.