Sprint Gears Up for Battle After T-Mobile Merger Talks Collapse

With deal talks with  T-Mobile officially over, Sprint can’t count on a big merger to take care of its troubles, according to Bloomberg. The unit of SoftBank has to invest in its long-starved network, address its $38 billion in debt and figure out a way to gain subscribers without losing money.

It’s a tall order, and it’s making investors pessimistic. Sprint shares sank as much as 14 percent Monday, and other telecom stocks fell too as Wall Street braced for a new round of price wars and lower profit margins. Sprint’s bonds also plummeted over concern the company will need to use more cash, about $6 billion a year, up more than 50 percent than in 2017, to get its network up to speed in a fiercely competitive market.

This is the second time Sprint and T-Mobile have failed to combine. offering a glimpse at what’s to come. After the first attempt, which was beaten back by regulators, Sprint set in motion a go-for-broke turnaround led by CEO Marcelo Claure. The effort helped stop subscriber losses and put the company on a path to generate cash.

Financing for the capital investment will come from cash Sprint can generate, untapped credit and more loans secured with airwave licenses, CFO Tarek Robbiati said during a call with analysts. The problem for Sprint is that it can’t afford to invest much more. Half of its debt and obligations are coming due over the next four years.

In an agreement announced Sunday, Sprint said it will use cable provider Altice’s broadband infrastructure to strengthen its nationwide network. Altice will also sell wireless service using Sprint’s network. The deal helps enhance Sprint’s coverage in places where Altice provides service under the Optimum brand, including Long Island, New York. And it could be the start of a deeper relationship.