Big telecoms mergers could test Trump’s anti-trust chops

by Steve Blum • , , , ,

There’s a lot of sniffing around telecoms companies in these dog days of summer. Softbank, Japanese tech investment giant which owns Sprint, is reported to be sniffing around T-Mobile, with a merger in mind. If it happened – if regulators allow it to happen – it would take the U.S. mobile telecom sector down to three companies, from the current four.

Charter Communications is getting a lot of attention, too. Softbank first tried to engineer a merger, and when that failed began talking about buying the company outright. But if it’s really in the hunt for T-Mobile, a second mega-deal with Charter becomes unlikely.

But it has company. According to a story on CNBC, Altice is looking at adding Charter to its U.S. kennel, which so far includes Suddenlink and Cablevision. It’s not much of a powerhouse in the U.S., yet, but the France-based company is a major player in Europe. If it wants to buy Charter, it has to entice controlling owner Liberty Media and its big dog, John Malone. The question, according to CNBC, is whether Altice’s track record of boosting the value of acquired cable companies by slashing operating expenses will do the trick…

In its short time operating in the U.S. market, Altice has shown a unique ability to cut costs and generate substantially higher margins, before taxes and other costs, than predecessor managements. But Liberty is still wary of taking Altice paper in the belief that it is too early to tell whether those gains are sustainable…

Charter, with $60 billion in debt and an expected purchase price that could reach or exceed $500 a share would represent an enterprise value of almost $200 billion.

Altice’s U.S. holdings may be small enough to avoid triggering a fatal anti-trust response from the federal justice department. In past times, a T-Mobile-Sprint combination probably would set off alarm bells – similar mergers did – but things might be different now. Conventional wisdom is that the Trump administration wouldn’t be so worried about increased telecoms market concentration, concerns about its treatment of the AT&T – Time Warner deal notwithstanding. We might know soon if that’s a good assumption.