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Here Are Sprint’s Options If Merger Talks With T-Mobile Fail

October 30, 2017, 7:33 PM UTC

Despite months of on-again, off-again merger negotiations, the prospects for a deal between Sprint and T-Mobile plunged on Monday amid reports that the two sides couldn’t agree on terms.

Shares of Sprint dropped as much as 13% to $6.05 in afternoon trading on Monday, the lowest price since Donald Trump’s election spurred renewed talk of a merger.

Sprint majority owner SoftBank Group decided to break off negotiations with T-Mobile owner Deutsche Telekom, Japan’s Nikkei Asian Review reported on Monday afternoon. Fortune reached out to both carriers and will update this story if they comment.

Some analysts viewed the leak as a bargaining tactic. T-Mobile, the third-largest wireless carrier, is larger and growing faster than Sprint. Deutsche Telekom and T-Mobile have been seeking to retain control of the combined company and to pay little more than the recent $7 to $8 price of Sprint shares in an all-stock merger. Giving up control and receiving no premium for its Sprint stake may have been unattractive to SoftBank.

The end of the talks certainly disappointed Wall Street, but it could be good for consumers and workers. Competition among four major wireless carriers has driven down prices over the past several years. Dropping to just three carriers could have allowed them to reverse those gains and raise prices. And the merged carrier would have sought billions of dollars in savings by laying off perhaps as many as 30,000 workers.

What happens next is anyone’s guess. Among the possibilities, Sprint could try to merge with another company, seek to strengthen its financial standing with a sale or spinoff of some of its spectrum licenses, or stick with the status quo and try to compete even harder against T-Mobile and larger rivals Verizon and AT&T.

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A month after starting merger talks with T-Mobile back in May, Sprint put the negotiations on hold so it could discuss possible transactions with cable giants Comcast (CMCSA) and Charter Communications (CHTR), which are both trying to break into the wireless market. But the cable companies decided to go it alone, sending Sprint (S) back to T-Mobile (TMUS). Analysts don’t see much current interest from the cable companies in acquiring Sprint, which has $34 billion of debt and other obligations on its balance sheet. And regulators, even under the pro-business Trump administration, would be highly unlikely to approve Sprint sale to Verizon (VZ) or AT&T (T). Other wild rumors have included winning backing from an American billionaire investor like Warren Buffett or John Malone. Not likely.

Over the past few years, Sprint CEO Marcelo Claure has tried to clean up the carrier’s finances, including by selling and leasing back various equipment and assets. Last fall, Claure borrowed $3.5 billion against a small portion of Sprint’s spectrum licenses, with talk that much more could be raised if needed. Claure could revive that game plan, as Sprint will need to invest substantial amounts over the next few years to build a faster 5G wireless network to keep up with its rivals.

Staying competitive won’t be easy. Despite deep price cutting, like offering up to five lines of unlimited data wireless service for just $90, Sprint’s subscriber growth has slowed. The carrier reported 439,000 total additions in the first nine months of this year, down from 1.2 million added in the same period of 2016.

Analyst Craig Moffett warns that without a deal, Sprint’s stock could plunge as low as $3.

“While Sprint itself is arguably somewhat stronger than it was two or three years ago, the industry is arguably worse, and Sprint still faces many of the same standalone solvency issues that they faced two, three, and four years ago,” Moffett wrote in a report last week. “They may have been forgotten, but they haven’t gone away.”