Sprint Corp. wants everyone to know it's not desperate. In the process, it's making itself look more desperate.
This was supposed to be the summer that T-Mobile US Inc. and Sprint finally got together -- a merger years in the making between the No. 3 and 4 U.S. wireless carriers. But Sprint's bargaining power in any talks with its fiercest rival has diminished amid financial strains and subscriber defections. It's also clear that Masayoshi Son, the Japanese billionaire who controls Sprint's parent SoftBank Group Corp., is seeking a transaction that will free him of Sprint's headaches. Such a motivated seller creates a buyer's market.
But now Son's trying to see if he can get better offers, or at least make the folks at T-Mobile think he can. This may backfire.
While at the media CEO summit in Sun Valley this week, Son "engaged" Warren Buffett and John Malone separately about participating in a deal with Sprint, the Wall Street Journal reported Friday. This comes just two weeks after it was leaked that Comcast Corp. and Malone's Charter Communications Inc. -- the two largest U.S. cable providers, which are in cahoots on a wireless expansion strategy -- met with Sprint executives to discuss a partnership of sorts.
Sprint would love to get bought by Buffett's Berkshire Hathaway Inc. or rolled up into Malone's sprawling communications conglomerate, but that's not going to happen. The only real possibility is an investment from either of the billionaires, in which case Son is unlikely to get the better deal. To be acquired outright by Buffett is considered an honor, but to negotiate with him or Malone takes skill. Son's missteps thus far shouldn't give investors much faith that he'll come out of these talks with a handsome deal for Sprint, but it's bound to be a sweet investment for Buffett or Malone.
Just look at what happened at Pandora Media Inc. this year: Malone, after playing cat-and-mouse with the online-radio company for months, finally got what he wanted: a huge stake in Pandora. It's an investment that serves Malone's side very well, but less so the shareholders of Pandora, and will allow him to exert power over the company without needing to pay a rich premium. And while Malone may have a reputation as the more ruthless dealmaker, Buffett always gets his way. His high-yielding stakes in H.J. Heinz Co. followed by Kraft Heinz Co. are recent examples where he's made out much better than minority shareholders. Buffett is also making out well from Berkshire's recent investment in embattled Canadian lender Home Capital Group Inc.
A merger with T-Mobile is a logical strategic and financial move that should benefit both sets of shareholders. An investment from Buffett or Malone, though, would be the powerful preying on the weak.
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