Sprint Nextel, T-Mobile USA rumors again surface

The on-again, off-again dance between Sprint Nextel Corp. (S) and T-Mobile USA Inc. (DTEGY) looks to be on again as published reports this morning indicated that the nation’s No. 3 and No. 4 operators are again in talks about a possible hook up.
While the reports noted that any potential deal is not expected in the short-term and that talks between the two have been reported in the past, the timing of the talks does seem ripe. Though the two operators are still quite large on their own, recent history has not been easy as they have fallen further behind their larger rivals.
Sprint Nextel seemed to have turned a corner during the fourth quarter posting its strongest customer growth results in years. T-Mobile USA on the other hand continued to show strains of competing against larger rivals having lost 23,000 subscribers during the fourth quarter, including 318,000 postpaid users.
New news on the talks look to be thin, though one condition that was mentioned was how a deal between Sprint Nextel and T-Mobile USA would look. Sprint Nextel is currently the larger player amongst the two in both revenues and customer base so it would be assumed that the carrier would remain in the dominate post deal.
However, T-Mobile USA’s parent company Deutsche Telekom AG has some rather deep pockets due to its vast international operations and could come to the plate with a financial package that could be enough to give it a bigger say in operations. One sticking point to this could be any U.S. government concern regarding a foreign company owning a majority interest in a vastly larger No. 3 operator, a concern DT managed to overcome when it acquired what was then a much smaller VoiceStream Wireless Corp. nearly 10 years ago.
T-Mobile USA’s management earlier this year talked about targeting the No. 3 position in the domestic mobile space.
A combined Sprint Nextel/T-Mobile USA operation would serve more than 80 million customers, making it a stronger competitor to the current No. 1 and No. 2 operators Verizon Wireless and AT&T Mobility, both of which serve more than 90 million “connections” on their networks. The combined efforts would also sport a diverse spectrum portfolio with holdings in the 800 MHz, 850 MHz, 900 MHz, 1.7/2.1 GHz and 1.9 GHz bands, as well as indirect access to 2.5 GHz spectrum through Clearwire Corp, which Sprint Nextel currently holds a controlling interest in.
Technology wise, the duo would have just about all the bases covered with Sprint Nextel’s iDEN and CDMA operations, T-Mobile USA’s GSM/GPRS/EDGE/W-CDMA/HSPA network and Clearwire’s WiMAX service. (Should be noted that Sprint Nextel has said it would be shuttering its iDEN operations by 2013.) T-Mobile USA has said it was looking at an eventual move to LTE for its next-generation offering, a technology that Sprint Nextel has hinted at as part of its Network Vision plans that LTE could be in its future and one that Clearwire is currently trialing in its Phoenix market.
A possible tie-up between Sprint Nextel and T-Mobile USA could also impact Clearwire, which has reportedly been in talks with T-Mobile USA about a possible spectrum sale or network leasing agreement. With Sprint Nextel owning a controlling interest in Clearwire, T-Mobile USA could be looking to join in with the current Clearwire ownership structure through a deal with Sprint Nextel rather than a direct investment into Clearwire.
Published reports have also indicated that Sprint Nextel and Clearwire are nearing resolution to their current squabble over reimbursement payments for access to the WiMAX network.
So, is the new news really new news? Well, carriers do have a history of floating potential ideas out to the public through “unnamed source” channels to gauge interest from the financial community. DT’s stock was up nearly 4% early Tuesday, while Sprint Nextel was up more than 3.5%.