U.S. banking and securities house JP Morgan sees a likely consolidation in the telecom sector under President Donald Trump, and T-Mobile's fortunes may be changing.
More specifically, JP Morgan Securities believes the Trump administration could be more merger-friendly and T-Mobile reportedly has a 90 percent chance of being part of a major strategic transaction in the next five years.
JP Morgan thinks that T-Mobile could be involved in a merger with Sprint or a cable company under the Trump administration that's currently being put in place. The banking and securities house expects Sprint to bid on T-Mobile, but Dish Network or some foreign companies are also likely candidates to acquire T-Mobile, Reuters reports.
T-Mobile has already been the subject of a deal with AT&T back in 2011, but it all fell through as U.S. regulators opposed the transaction. As AT&T backed out of the deal, it gave T-Mobile spectrum and cash to make up. T-Mobile used it to grow its business and bloom into what it is today - one of the biggest wireless operators in the United States.
Sprint T-Mobile Deal Increasingly Likely
According to JP Morgan, Sprint could soon be interested (again) in buying T-Mobile. After all, such a deal was already on the table in 2014, but again it was stomped by regulators. T-Mobile has since outperformed Sprint and has become the third-largest carrier in the United States, but that doesn't mean Sprint can't seek another deal.
In fact, JP Morgan analyst Philip Cusick now sees a 35 percent chance of a Sprint and T-Mobile tie-up, compared to the 10 percent chance back in September 2015. Cusick further believes that a deal between T-Mobile and Sprint would have a 70 percent chance of receiving the necessary regulatory approval.
Softbank owns 80 percent of Sprint, while Deutsche Telekom owns 65 percent of T-Mobile. Back in November, Deutsche Telekom CEO Tim Hoettges said the company was not interested in selling T-Mobile just yet, but a change in the regulatory environment in the United States under Trump could spell a different fate for T-Mobile.
Since T-Mobile has outgrown Sprint, however, its valuation has also increased and analysts believe that Sprint would need to shell out north of $90 billion to buy T-Mobile as it is today. That's almost four times more than it was looking to spend in 2014.
Nevertheless, that doesn't mean the deal would not be worth it and it may pass the regulatory scrutiny it failed in with the Obama administration.
"We believe that parents Softbank and Deutsche Telekom have increased their preference for a tie-up in the last six months and that the value of about $5 billion of annual synergies is enough to smooth over most disagreements on relative value," says Cusick, as cited by Reuters.
Dish Networks Buying T-Mobile?
In addition to a potential deal between Sprint and T-Mobile, rumors have also indicated that a cable company could acquire the Uncarrier and JP Morgan now seems to bolster such claims. Buying T-Mobile would allow a cable or satellite provider to gain a notable foothold in the telecom industry and although it wouldn't be cheap, the strategic play could pay off big in the end. Dish is one such cable company that has been rumored to acquire T-Mobile, but other companies are not out of the question either. Dish Network just seems to be the most likely because it already has spectrum that it doesn't use.
It remains to be seen how things will unfold and what the future brings for T-Mobile, but if JP Morgan is right, the future might just bring a major strategic deal.