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Sprint and T-Mobile: Will second time be a charm?

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Sprint's (S) controlling shareholder Masayoshi Son has made no secret of his urge to merge the fourth-largest wireless provider with another carrier. In recent months, Son, who heads Japan's SoftBank, has reportedly held buyout talks with Comcast (CMSCA) and Charter Communications (CHTR) but now has turned his sights -- once again -- to T-Mobile (TMUS).

The two companies previously held merger talks in 2014, when Sprint was seeking to become the majority owner of the combined carriers. The $32 billion transaction collapsed amid signs of antitrust concerns at the U.S. Department of Justice.  

According to CNBC, SoftBank has returned to the idea of a deal with T-Mobile. The Japanese telecom held frequent discussions in recent weeks with T-Mobile's German parent, Deutsche Telekom, about an all-stock deal that would make leave the DT in control of both companies. Among the issues that need to be ironed out is whether T-Mobile's colorful CEO John Legere would run the combined company, the business news channel said. Sprint declined to comment for this story. T-Mobile couldn't be reached.

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Son acquired a controlling stake in Overland Park, Kansas-based Sprint three years ago with the intention of also buying T-Mobile. The Japanese billionaire, however, was forced to abandon that pursuit in the face of regulatory opposition, which also stymied AT&T's (T) attempted acquisition of T-Mobile in 2011.

Whether regulators will be more amenable to a Sprint-T-Mobile merger now than they were then is hard to say.

At least the combination shouldn't seem as massive this time around. After all, AT&T has about 137 million U.S. wireless customers, more than double the 59.7 million that use the Sprint network. That lessens the potential for overlap with T-Mobile, which would be a red flag to regulators concerned about potential rising prices. Verizon is the top U.S. carrier with about 147 million customers.

"The two biggest firms are no longer involved in this merger," said Herbert Hovencamp, an antitrust expert at the University of Pennsylvania's Wharton School of Business and School of Law. "I think this will get a more favorable look than the AT&T -T-Mobile merger did. ... The atmosphere right now looks better."

Given the uncertainties about how the Trump administration might react, Hovencamp said he was reluctant to make a formal prediction about how the deal might fare at the new Department of Justice. The Federal Communications Commission, which regulates the wireless industry, would also have to approve the merger.

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Still, joining the third- and fourth-largest wireless carriers doesn't sit well with some consumer groups.

Michael Copps, a former FCC chairman who's a senior adviser to Common Cause, said he "isn't a fan" of wireless industry consolidation because it would lessen competition and hurt consumers.

"Having four [major U.S.] carriers is obviously better than having three," Copps said. "Competition is all-important. Competition, in this case, is necessary."

Under CEO Legere's leadership, T-Mobile has offered consumer-friendly initiatives such as ending service contracts, innovations that Copps and another critic of the deal, John Bergmayer of Public Knowledge, said they fear will disappear if Sprint absorbs the carrier.

"Probably the strongest argument against this merger is just how successful T-Mobile has been on its own after the rejected AT&T merger," said Bergmayer, a senior counsel at Public Knowledge. "It has really shaken up the industry. ... Whereas if you have two or three major competitors, you aren't going to have that kind of maverick behavior."

According to independent telecom analyst Jeff Kagan, T-Mobile needs the merger more than Sprint does. Under Legere, T-Mobile has gained customers at its rivals' expense and would need to find other another partner if the Sprint deal falls apart again.

Wall Street has rewarded T-Mobile's success, sending its shares up more than 8 percent this year, while shares of AT&T, Verizon, and Sprint have declined.