It’s Un-Merger Tuesday: Sprint- T-Mobile, Fox- Time Warner Bids Unravel

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This morning Sprint Corporation (NYSE:S) and its parent company Softbank Corp. (TYO:9984) (OTCMKTS:SFTBF) are apparently abandoning their bid for T-Mobile. US Inc (NYSE:TMUS). Sprint shares dived in early trading, falling as much as 19% after the revelation, which came via a source who tipped off multiple media outlets earlier this morning. Shares of T-Mobile also fell, slumping as much as 9% in early trading.

The news comes less than 24 hours after Twenty-First Century Fox Inc (NASDAQ:FOXA) abandoned its bid for Time Warner Inc (NYSE:TWX). Shares of Fox received a boost from the news, climbing by nearly 5% in early trading, although Time Warner shares slumped as much as 12%.

Sprint ends pursuit of T-Mobile

Multiple media sources are reporting that Sprint and Softbank decided last night at a board meeting that regulators would not approve their proposal to buy out T-Mobile U.S. Just a few major players currently dominate the mobile phone industry. As a result the board reportedly decided that it would be unlikely that antitrust regulators would approve the creation of yet another behemoth due to the elimination of another competitor.

CNBC reports that its source said the board ultimately decided to walk away because of a rule the Federal Communications Commission proposed last week. That rule would keep T-Mobile and Sprint from bidding together in an upcoming auction of wireless spectrum.

As The New York Times notes, this means that Softbank is going to have to find another way to more effectively take on the other two giants in the U.S. mobile industry: AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ). Shares of Verizon and AT&T also edged downward in early trading today, each falling by more than 1%.

Without a deal between Sprint and T-Mobile U.S., both companies face an uphill battle against AT&T and Verizon. Together, the two smaller carriers hold less than one-third of the wireless market in the U.S.

This morning Sprint also announced that it had appointed a new CEO. In a regulatory filing with the Securities and Exchange Commission, the wireless carrier said it chose Marcelo Claure. He was one of Sprint’s board member and also the founder of wireless distributor Brightstar.

Time Warner, Fox also abandon bid

Last night shortly after 4 p.m. Eastern, a very short email from Fox executive Rupert Murdoch informed Time Warner CEO Jeffrey Bewkes to say that they decided to withdraw their bid. It didn’t take long for a letter saying the same thing to be delivered by hand.

If the two companies had merged, it would have been the largest merger in a decade, reports The New York Times. It would have brought together two giants in a $150 billion merger and combined Hollywood’s two largest TV and movie studies. Fox was trying to take on ESPN’s dominance in sports broadcasting and merge the liberal Time Warner with the conservative Fox News.

Murdoch repulsed by Time Warner’s hostility

Apparently Murdoch did not appreciate Time Warner’s attitude to the merger. Also his own shareholders were adamantly opposed to it, as demonstrated by today’s share increase on the news that the deal is off. Murdoch said in a statement that Time Warner’s board and management refused to engage with them to come up with a “highly compelling” offer.

Interestingly enough, Time Warner posted a massive earnings per share beat right after Fox walked away from the table. The cable giant reported earnings of 98 cents per share, compared to the consensus estimate of 84 cents per share. As Time Warner shares slumped, it seems like news that the merger is off has outweighed news of the big earnings beat.

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