The possibility that Charter might buy Sprint appeared to be dead as of late yesterday, when Charter gave reporters a statement saying the company wasn’t interested in acquiring Sprint. But SoftBank, the company that controls Sprint, apparently isn’t giving up on the idea of Charter – Sprint M&A.

Despite the fact that Charter is valued at more than $100 billion, while Sprint is valued at just $33 billion and has a lot of debt, SoftBank is now working on an offer to buy Charter outright, according to a news report from this morning. A Bloomberg report quotes an unnamed source with knowledge of SoftBank’s plan, who said an offer could come this week.

Charter – Sprint M&A?
Depending on one’s point of view, a Charter – Sprint M&A could make sense.

As the smallest carrier in a four-player national wireless market, Sprint has been struggling and has long been expected to be a merger partner with number three carrier T-Mobile or a cable company. And as more and more video viewing shifts to mobile, cable companies have been exploring the best strategy for entering the wireless market.

Comcast already launched a Wi-Fi first offering that will rely on the cable industry’s extensive Wi-Fi infrastructure where possible and fall back on the Verizon network when Wi-Fi is not an option. Like Comcast, Charter also has an existing resale agreement with Verizon that could support a similar offering. But potentially the cable companies could benefit from greater control and a better cost structure for their wireless offerings than the Verizon agreement offers.

News reports from late June had Charter and Comcast negotiating jointly – and exclusively — with Sprint about a possible partnership that might have involved a minority investment by Comcast and Charter in Sprint. The exclusivity aspect of those negotiations now has expired, likely triggering Softbank’s new approaches toward some type of combination with a cable company.

A separate exclusivity deal between Charter and Comcast apparently remains in place, however. Back in early May, the cable companies said they would “work only together with respect to national mobile network operators, through potential commercial arrangements, including MVNOs and other material transactions in the wireless industry for a period of one year.”

Softbank is not bound by that agreement, however, and should be able to make any purchase offer that backers are willing to finance, potentially pitting that offer against the Charter-Comcast exclusivity deal. If Softbank makes an offer that is attractive enough to Charter shareholders, we should expect to see them put up a fight against any attempt by Charter management to use the Comcast exclusivity deal to fight a Softbank takeover.

Ultimately, though, the big question is the competitive strength of a merged Charter – Sprint and what either company really stands to gain from a merger.

Cable investors reportedly are wary of cable companies entering the wireless market and may view the existing deal with Verizon as a lower-risk approach to supporting a mobile offering – at least in the short term. And the question for Sprint is whether investing in a cable company and entailing additional debt is the best way to gain market share and profitability. Some might argue that a merger with T-Mobile, which already has considerable upward momentum, would be a stronger bet.

If indeed Softbank puts in an offer for Sprint this week, clearly the terms of that offer will be critical. And whatever Softbank offers, the terms of the deal – and how Charter investors respond — should provide more detail about how both Sprint and the cable companies view the competitive marketplace moving forward.