Sprint owner SoftBank ends T-Mobile merger talks over ownership disagreement

We've seen this play out many times before.

The longstanding potential merger between Sprint and T-Mobile has taken another turn, and this time it isn't a positive one. After rumors earlier in October indicating that merger talks were quite advanced, reports out of Japan claim that Sprint owner SoftBank has shut down the discussion after failing to come to agreement on details of ownership in the combined company. SoftBank, led by Japanese businessman Masayoshi Son, is expected to formally end merger talks with T-Mobile's parent Deutsche Telekom as early as tomorrow.

The disagreement between parent companies apparently centered around which would hold a controlling stake in the new company, with Deutsche Telekom understandably wanting control considering its subsidiary is the larger of the two companies pre-merger. SoftBank was apparently willing to negotiate some in this regard, but eventually decided it didn't want to relinquish the idea of holding the controlling stake.

Sprint is half the size of T-Mobile, but SoftBank still thought it deserved a controlling stake.

Stock in both Sprint and T-Mobile took a nosedive immediately following the news, but have since rebounded partially. But no single-day change can erase the fact that T-Mobile is currently valued at over $52 billion, more than double Sprint's $25.9 billion market cap. Stock prices aside, it's clear that T-Mobile (and therefore Deutsche Telekom) is in the power position with the positive trajectory as Sprint falls further behind in the fourth position among U.S. carriers. It wasn't long ago that Sprint was the larger of the two, but it seems there's no getting back to that position now.

Rather than see that Sprint's best possible way to profitability (and long term viability) is the combine with T-Mobile, it seems Mr. Son is willing to ride with what he's got rather than relinquish control of the combined company to Deutsche Telekom despite its larger stake in the deal. Whether or not such a large merger would eventually pass through the U.S. regulator bodies is another question altogether — but it doesn't seem we'll even get there now.