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Sprint May Reconsider T-Mobile Acquisition

Daily Insight | Rich Karpinski | February 10, 2014

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This must be like déjà vu all over again for T-Mobile, as Sprint officials are meeting to discuss whether the company really should make a run at acquiring its competitor in the U.S. mobile broadband market.

 

Negative public comments coming out of the Department of Justice and the Federal Communications Commission have Sprint rethinking its T-Mobile bid, according to The Wall Street Journal. The news provider added that Sprint was taken aback by not only the level of opposition, but also the public nature of the comments. Sprint Chairman Masayoshi Son and Chief Executive Dan Hesse met with officials from both the DOJ and the FCC in recent weeks. Should Sprint decide to forge ahead in its effort to acquire T-Mobile—which Son believes is Sprint’s only choice to grow in the U.S. market—it may take weeks or months to hash out a new strategy, the news provider reported.

 

Yankee Group Senior Analyst Rich Karpinski comments

 

“We’re at the point of commenting on rumors about rumors, but that’s typical with these types of blockbuster proposals. There seems to be the ring of truth here, if only because the word leaking out of both the DOJ and FCC has been so critical of this proposed deal. It’s easy to sympathize with SoftBank, which bought into Sprint with the idea it would have a fairly free hand to compete in the U.S. Standing alone, Sprint will be challenged to do so—even with its spectrum advantage via Clearwire, which can only be fully leveraged with capex and time. As for T-Mobile, despite recent market momentum (which unfortunately for the suitors seems to be largely behind the calls to block the merger), the operator will be equally challenged to reach the heft and impact of its larger rivals. 

 

Indeed, T-Mobile’s uncarrier successes aside, the past two years have in many ways seen the market moving undeniably toward a combination of the U.S. market’s Nos. 3 and 4 players. If SoftBank is now asking itself ‘What comes next?’ it may be just as important a question for U.S. regulators. While it is not their job to ensure the success of market participants, it is their job to foster a competitive environment and look after the interests of consumers. Will the dynamics between two sets of players—pairs of like-sized operators mining the high end and low end via similar strategies, respectively—create the market they are looking for? Is that more choice or less? It’s premature to answer those questions at the moment, but it is the right time to be asking them.”

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