Sprint Ponders T-Mobile Takeover

by Matt Klassen on December 18, 2013

Sprint is hoping to succeed where AT&T so famously failed a few years ago: by acquiring T-Mobile. According to a report in The Wall Street Journal, citing those ‘familiar with the matter,’ Sprint is working on acquiring its wireless rival T-Mobile, a deal that would see the 3rd and 4th largest carriers in the American market join forces.

The move would be an exclamatory finish to a period of wild consolidation and acquisitions in the American wireless market, with Japan’s Softbank acquiring Sprint, Sprint acquiring Clearwire, and T-Mobile acquiring lesser prepaid wireless rival MetroPCS.

The merger would effectively create a strong rival for America’s Big Two, Verizon and AT&T, but that doesn’t mean Sprint’s attempt will have any more success than AT&T’s failed attempt did more than two years ago. But as it stands, Sprint is parsing its way through preliminary regulatory concerns, attempting to determine whether it would make sense to put forth a bid of a rumoured $20 billion some time early in the New Year.

Executives from both Sprint and T-Mobile agree that the government should allow a combination, in some measure at least, of both companies, as it would be the only way going forward that either could really compete with market heavyweights Verizon and AT&T. In fact, those two market leaders account for more than two thirds of the nation’s wireless subscribers and, as the WSJ report says, account for “virtually all of the U.S. industry’s profits.”

To wit, both Sprint and T-Mobile have struggled mightily for years to attract and retain a profitable subscriber base, both companies losing millions of customers to their larger competitors every year. In fact, T-Mobile’s growth in its postpaid customers over the last two quarters is the company’s first customer growth in over four years.

But that said, while there’s little doubt that a merger between the third and fourth largest U.S. carriers would create a formidable competitor for AT&T and Verizon, it nevertheless won’t be easy to overcome the formidable regulatory hurdles that would undoubtedly challenge such a deal. As the WSJ report states, the merger “would likely face tough opposition from antitrust authorities, who worry consumers could suffer without a fourth national competitor to keep a check on prices.”

In fact, if American regulatory authorities are looking for a reason, any reason, to squash any rumoured Sprint merger with T-Mobile, they need only look north of the border, where three large telecom operators control everything about the Canadian wireless market, offering Canadians some of the worst service, highest prices, and least amount of choice in the developed world. Further, once that mobile triumvirate is established, there is little the government can do about it.

In the end, Sprint is still a ways off from committing to the rumoured $20 billion bid for T-Mobile, as its wary of walking down the same dead end road AT&T traversed two years ago, when its $39 billion acquisition bid ultimately failed to garner regulatory approval. Without the same deep pockets, Sprint will want to tread lightly, lest it waste an undue amount of its meagre resources on chasing this pipedream.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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