Sprint and T-Mobile call off merger after months of talks
November 5, 2017 by admin
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SAN FRANCISCO/NEW YORK (Reuters) – Sprint Corp (S.N) and T-Mobile US Inc (TMUS.O) said on Saturday they have called off merger talks to create a stronger U.S. wireless to rival to market leaders, leaving No. 4 provider Sprint to engineer a turnaround on its own.
The announcement marks the latest failed attempt to combine the third- and fourth-largest U.S. wireless carriers, as Sprint parent SoftBank Group Corp (9984.T), and T-Mobile parent, Deutsche Telekom AG (DTEGn.DE), show unwillingness to part with their prized U.S. telecom assets.
The companies’ unusual step of making a joint announcement on the cancelled negotiations could indicate they still recognise the merits of a merger and could keep the door open for potential future talks.
The companies said they ended talks because they “were unable to find mutually agreeable terms.”
A combined company would have had more than 130 million U.S. subscribers, behind Verizon Communications Inc (VZ.N) and ATT Inc (T.N).
John Legere, president and chief executive of T-Mobile, said in the statement that the prospect of combining with Sprint was compelling but “we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record.”
Sprint CEO Marcelo Claure said that even though the companies could not reach a deal, “we certainly recognise the benefits of scale through a potential combination.”
Claure said Sprint has agreed it is best to move forward on its own with “significant assets, including our rich spectrum holdings, and are accelerating significant investments in our network to ensure our continued growth.”
Failure to clinch an agreement leaves SoftBank CEO Masayoshi Son, a dealmaker who raised close to $100 billion for his Vision Fund to invest in technology companies, with the need to find another option for Sprint.
Sprint is in the middle of a turnaround plan and has sought to strengthen its balance sheet by cutting costs. But industry analysts have expressed concern that the company, weighed down with total debt of $38 billion, has few financial options. Even though its customer base has expanded under CEO Claure, growth has been driven by heavy discounting.
Claure said in August that while Sprint could sustain itself, cost savings from a transaction were significantly better than remaining a standalone entity.
Analysts said an end to talks to T-Mobile would leave debt-laden Sprint without the scale needed to invest in its network and to compete in a saturated market.
Sprint has sought to strengthen its balance sheet by cutting costs. To shore up cash over the past two years, the company has already mortgaged a portion of its airwaves and equipment through sale leaseback deals.
Mark Stodden, telecom analyst at Moody‘s, said “To really take the kind of next step from a business that has been stabilized to a business that has been growing is going to require a new more intense investment phase.”
T-Mobile is a better position than Sprint as a standalone company, analysts have said. German majority owner Deutsche Telekom, which owns roughly 65 percent of the U.S. carrier, was the first major carrier to eliminate two-year contracts, a shift quickly embraced by consumers and copied by competitors. The company has also badgered rivals with its unlimited data plans.
Deutsche Telekom CEO Tim Höttges said in a statement on Saturday that T-Mobile has a “strong basis for growth in the upcoming years.”
MONTHS OF TALKS
Both companies had expressed interest in a tie-up this year, and industry analysts expected T-Mobile to have more leverage in discussions this time around. SoftBank was prepared to give up control to do a deal with T-Mobile, sources familiar with the company’s thinking told Reuters in February. But no deal was announced immediately following the conclusion of a ban on merger talks in April that was associated with a U.S. government auction of wireless airwaves. Both Sprint and T-Mobile said they were open to exploring other options.
An added wrinkle was Sprint’s negotiations with cable companies Comcast Corp (CMCSA.O) and Charter Communications Inc (CHTR.O).
A source told Reuters in July that SoftBank was considering an acquisition offer for Charter in a deal where it would combine the cable company with Sprint.
The two companies came close to announcing a merger in 2014 but called it off at the last minute due to regulatory concerns.
Industry executives have said a combined Sprint-T-Mobile entity would have the scale, network and enhanced portfolio of wireless airwaves and a better chance to develop 5G, the next generation of wireless technology.
Legal experts also said earlier this year that it was difficult to predict whether the current administration would be more receptive of a deal.
Industry executives have expressed optimism about the prospect of consolidation on earnings calls. But President Donald Trump has also made populist comments on antitrust and prioritised job creation as a key platform.
(This story corrects in the first paragraph that Sprint is No. 4 provider, not No. 3.)
Reporting by Liana B. Baker in San Francisco and Anjali Athavaley in New York; additional reporting by Doug Busvine in Frankfurt; Editing by Matthew Lewis and Marguerita Choy
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Netflix has a mess on its hands with the collapse of ‘House of Cards’
November 5, 2017 by admin
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When “House of Cards” debuted in 2013, it catapulted Netflix into a whole new level of Hollywood recognition and acclaim. The dark political series about an unscrupulous Washington power couple became Netflix’s first breakout hit, planting a flag for the streaming service in the competitive world of original TV programming.
But just as its protagonist Frank Underwood fell ignominiously from power last season, the series itself has collapsed in scandalous fashion following allegations around actor Kevin Spacey, who has been accused of sexual harassment and assault by numerous men including employees on the show.
Netflix isn’t the only company left holding the bag. Media Rights Capital is the production company that owns the series and licenses it to Netflix. Since news about Spacey broke Sunday, followed by additional allegations, the companies moved quickly to cancel the seventh season of “House of Cards” and put production of the sixth season on indefinite hold. Netflix said in a statement Friday night that it is cutting all ties with Spacey and that he will not be involved with the show that he has starred in since 2013.
“Netflix will not be involved with any further production of ‘House of Cards’ that includes Kevin Spacey,” the company said in a statement.
While the scandal represents a public-relations debacle for Netflix, it isn’t likely to materially affect the company, even though “House of Cards” remains one of its most popular series, experts said.
“I think of ‘House of Cards’ as a trampoline,” said Paul Levinson, a professor of media and communications at Fordham University. “Netflix put it up, jumped on it and Netflix got so high that it no longer needs ‘House of Cards.’ ”
Netflix spent about $100 million to produce two 13-episode seasons for “House of Cards.” The political drama launched the company’s venture into original programming, helping to transform the streaming service into a global powerhouse and disrupter of the TV business. The Los Gatos-based company now has 104 million paid streaming subscribers and has made massive investments in new shows. It will spend as much as $8 billion on content next year alone.
As a result, Netflix now has multiple hit series — including “Stranger Things,” “Orange Is the New Black” and “The Crown” — that it can rely on to retain and attract subscribers.
Anthony Rapp on Sunday in Buzzfeed — will likely work in the company’s favor, according to Michael Pachter, a digital media analyst at Wedbush Securities, where he covers Netflix.
“I think Netflix is handling this extremely well,” Pachter said. “This is what you want them to do from an investor’s point of view.”
Analysts said the cancellation of “House of Cards” was likely an easy decision for Netflix to make because the series was already past its prime and nearing the end of its run.
Public scandals are rare for major TV series but not unheard of. The most recent instance was CBS’ “Two and a Half Men,” which saw the departure of Charlie Sheen after the actor’s personal problems became public. His character was killed off from the show.
Among “House of Cards” fans, the most recent season was seen as something of a creative resurgence but the show was clearly on the decline and had lost a lot of its buzz. Creator and showrunner Beau Willimon had left the show last year after four seasons.
“During the time I worked with Kevin Spacey on ‘House of Cards,’ I neither witnessed nor was aware of any inappropriate behavior on set or off,” Willimon said in a statement. “That said, I take reports of such behavior seriously and this is no exception. I feel for Mr. Rapp and I support his courage.”
Rapp alleged that he was 14 when Spacey made an unwanted sexual advance on him during the 1980s. Spacey responded by saying that he didn’t recall the incident, but offered Rapp “the sincerest apology for what would have been deeply inappropriate drunken behavior.” The two-time Academy Award winner also used the opportunity to come out as a gay man.
Since Sunday, the accusations have quickly snowballed, including an unnamed artist who told Vulture that he was a minor when he entered into a consensual sexual relationship with Spacey decades ago.
On Thursday, eight current and former “House of Cards” employees alleged to CNN that Spacey created a “toxic” work environment with his behavior. The allegations include one former production assistant who said Spacey sexually assaulted him during one of the show’s early seasons.
A representative for Spacey could not be reached for comment.
Netflix could face civil legal exposure from any employee harassment that occurred on “House of Cards” because Spacey was also credited as an executive producer on the show, which means that he was in a supervisory position, according to Genie Harrison, an attorney who specializes in employment and sexual harassment cases.
“The company will have strict liability because he’s a supervisor and because he would be seen as acting on behalf of the company,” Harrison said.
As the studio behind “House of Cards,” Media Rights Capital could also face legal exposure for any of its employees who were harassed by Spacey on the show.
MRC, which is based in Beverly Hills, declined a request for an interview but said in a statement that during the show’s first year of production, in 2012, someone on the crew shared a complaint about a specific remark and gesture made by Spacey. The company didn’t elaborate on the nature of the complaint.
“Immediate action was taken following our review of the situation and we are confident the issue was resolved promptly to the satisfaction of all involved. Mr. Spacey willingly participated in a training process and since that time MRC has not been made aware of any other complaints involving Mr. Spacey,” the company said in the statement.
Netflix, which also declined an interview request, said in a statement Friday that it was just made aware of the 2012 incident and was informed that it was swiftly resolved.
“Netflix is not aware of any other incidents involving Kevin Spacey on-set,” the company said in a statement. “We continue to collaborate with MRC and other production partners to maintain a safe and respectful working environment.”