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Sprint, T-Mobile edge closer to merger: report

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Sprint's (S) stock price is rising amid reports that it is nearing a deal to merge with rival T-Mobile US (TMUS).

Reuters reported on Friday that the telecommunications companies are close to agreeing to preliminary terms on a deal, citing sources close to the situation. A merger would unite Sprint, the third-largest wireless carrier, with the fourth-largest provider.

Sprint shares jumped 36 cents, or 4.4 percent, to $8.39 in morning trading. T-Mobile share edged up 0.7 percent to $63.81.

If this sounds familiar, it's because it is: The two companies explored a merger in 2014, with Sprint seeking to become the majority owner of the combined carriers. But the talks fell apart because of U.S. Justice Department concerns that a deal could hurt competition and raise wireless costs for consumers. 

Although such antitrust concerns remain, analysts think the Trump administration would be more receptive to a tie-up between Sprint, which is majority-owned by Japan's SoftBank, and T-Mobile than were Obama-era regulators.   

Reports surfaced earlier this year that the two companies were again considering a merger after T-Mobile CEO John Legere noted that joining forces with Sprint could be a "a potential future outcome" with Mr. Trump in the White House. 

Sprint's connection to SoftBank founder Masayoshi Son -- who announced a $50 billion plan to invest in the U.S. last December with then-President-elect Donald Trump grinning at his side -- also is seen as helpful to a potential merger.

Another previous stumbling block in clinching a deal was price, particularly how the companies should value Sprint's unused 2.5GHz spectrum, noted Jonathan Chaplin, an analyst with New Street Research. That spectrum would allow the merged company to quickly expand wireless services while minimizing infrastructure investment. 

"[The] key to unlocking the deal and determining which equity is best positioned comes down to the value that is ascribed to the 2.5GHz spectrum," he said in a report this week. 

Sprint's spectrum holdings make it an attractive target in an industry that is consolidating rapidly. The company has also reportedly considered mergers with cable companies Charter Communications and Comcast (CMCSA).