On Wednesday morning, Sprint Corp ( S) CEO Michel Combes extolled the virtues of his company's anticipated merger with wireless carrier T-Mobile ( TMUS) for customers, particularly regarding a more robust 5G network than either firm could build alone. But no one asked or spoke about when they expect the deal to be finalized.
"This combination (merger) will accelerate the U.S. leadership opportunity to rapidly bring the best nationwide 5G network to market with the breadth and depth needed to fuel a giant wave of innovation and disruption throughout the marketplace," Combes said during the company's earnings call.
But CRFA Research analyst Angelo Zino said competitors Verizon Wireless ( VZ) and AT&T ( T) shouldn't worry about Sprint merging with T-Mobile. Zino predicted there was probably less than a 50% chance the proposed merger of the nation's third- and fourth-largest wireless carriers would be approved by the Federal Trade Commission.
Zino maintained a 12-month price target of $6 on the stock, noting Sprint will be unlikely to refinance down its high level of debt without the merger. Sprint shares closed Wednesday at $5.38, a decline of nearly 1% for the day.
"There are a number of reasons it will be tough for regulators to approve the thing, but primarily it will be hard to convince them it will be better for consumers with three players instead of four," Zino said. "At the moment we're on the sidelines because there isn't really much you can do with it."
Sprint released first-quarter results for the year with net operating revenue of $8.13 billion, down from $8.16 billion a year ago, but above FactSet's estimates of $8.06 billion. Earnings per share fell to four cents ($176 million in quarterly net profit) from 5 cents ($206 million in net profit) a year ago.
Sprint reported $35.7 billion in long-term debt.
Sprint's efforts to ramp up a 5G network -- if it continue to operate as a standalone company -- "will fall pretty far behind, especially of the big two (AT&T and Verizon) who have the assets and capital needed for 5G," Zino said.
"If they merged they'd be comparable in size to (Verizon and AT&T) with the biggest benefit being a more efficient use of cash, significant cost synergies and some nice earnings potential over time," Zino said.
Sprint and T-Mobile announced their proposed merger in late April, with plans to build out a Next Generation network nationwide.
On Wednesday, Sprint executives said they will continue to press ahead with a planned launch of their 5G network early next year.
"We are making good progress in that direction," Combes said.
Both companies have said they would like to see the merger completed by July 2019.
