Sprint Rethinking T-Mobile Acquisition after Regulatory Opposition

by Matt Klassen on February 11, 2014

It seemed a pipedream at best, a waste of time and money at worst, Sprint’s announcement in December that it was working its way through the preliminary stages of acquiring wireless rival T-Mobile. While more feasible than AT&T’s attempted acquisition of T-Mobile, Sprint’s proposal seemed to face insurmountable opposition the moment it was made public. In fact, if regulators needed any evidence of the challenges posed by a three carrier market they need only look north of the border where Canada is desperate to break the ironclad lock Telus, Bell, and Rogers currently have on the country.

So perhaps its no surprise then to hear that Sprint’s desire to form an American wireless triumvirate has hit its first seemingly insurmountable obstacle, as the country’s third largest carrier is reportedly regrouping after a meeting with antitrust officials who expressed “strong sentiments against a deal publicly.”

While there is nothing that says that Sprint cannot move forward with an attempted acquisition bid of its smaller rival, mired in a laboriously slow network upgrade and the continuous Sisyphean task of attracting subscribers only to see them leave again Sprint simply doesn’t have the deep pockets of Ma Bell, meaning it doesn’t have the option to waste an undue amount of its meagre resources chasing this fantasy.

When Sprint Chairman Masayoshi Son and Chief Executive Dan Hesse recently met with officials from the Justice Department and the Federal Communications Commission they knew their proposal to acquire T-Mobile would be a hard sell, particularly given the fact that T-Mobile had already acquired MetroPCS, ostensibly making this the combination of three carriers. But according to the sources for the Wall Street Journal, the men were still “surprised by the level of opposition and its very public nature.”

In fact, given the response of regulatory officials Sprint is reportedly back to the drawing board, contemplating whether there is any sense in investing the time and energy to move forward against such opposition.

There are clearly two diametrically opposed viewpoints at play here. Sprint, its parent company, T-Mobile, and its parent company Deutsche Telekom have argued that a merger between the third and fourth place carriers would create a more robust and competitive wireless market, one where the new company would be able to truly compete with AT&T and Verizon.

While saying nothing on record about this decision in particular, the DOJ and FCC have repeatedly articulated their own opinion that the American wireless environment is more competitive with four major players than it is with three, the key reason AT&T’s similar bid for T-Mobile didn’t earn regulatory approval.

Both Sprint and T-Mobile have countered with the view that their respective companies are not competitive in this market, but floundering as they struggle to retain subscribers and develop competitive networks, neither having the resources Verizon or AT&T routinely bring to bear.

But despite my thoughts that this deal was likely dead the moment it was made public, and certainly doomed following its failure to pass its first hurdle, it looks like Sprint may not be ready to give up yet, as reports indicate that Mr. Son believes he can convince regulators about the merits of a three carrier market and that his company simply needs to plot a new strategy going forward.

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

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