Rumors over the weekend began to sizzle that Sprint and T-Mobile US were looking into a possible partnership that would provide a more formidable foe against the nation’s two largest wireless operators Verizon Wireless and AT&T Mobility.
The rumors, which were stoked by a The Wall Street Journal article, claim that Sprint is looking at acquiring a controlling interest in T-Mobile US from its parent company Deutsche Telekom. A combination of Sprint and T-Mobile US would count nearly 100 million total customers across their operations, nearly equaling the total of its larger rivals and allowing a combined company to drive scale on par with Verizon Wireless and AT&T.
That move is reportedly being driven by Softbank Chief Executive Masayoshi Son, who is looking to beef up his interest in the U.S. market following Softbank’s recently completed $21.6 billion acquisition of a 78% stake in Sprint. DT currently owns around 70% of T-Mobile US, having diluted its stake in its U.S. operations following the acquisition of MetroPCS earlier this year. That MetroPCS deal could hold up an eventual sale as DT is required to hold onto its stake in T-Mobile US through most of next year.
DT had previously tried to unload its stake in its U.S. operations in 2011 through an eventually scuttled $39 billion deal with AT&T. In refusing to approve that deal, the U.S. government stated it did not want to see the elimination of an aggressive competitor in T-Mobile US from the market and that it wanted to have at least four nationwide operators. T-Mobile US has indeed managed to become an attractive alternative for consumers over the past year posting customer growth results on par with its larger rivals. However, T-Mobile US continues to lag behind those operators in operating margins as it has targeted consumers with lower-priced rate plans.
Sprint for its part has continued to struggle operationally, with Softbank’s investment seen as a lifeline of sorts to the operator. Sprint CEO Dan Hesse recently admitted that the carrier would likely continue to slide until at least mid-2014.
In addition to the customer base scale, a combined Sprint/T-Mobile US would have an ample spectrum portfolio that could bolster LTE rollout plans. T-Mobile US has recently surpassed the 200 million potential customer coverage mark for its LTE service running across 1.7/2.1 GHz spectrum, while Sprint is looking to hit that target by year end with its LTE service running across the 1.9 GHz band. T-Mobile US said it plans to have as much as 40 megahertz dedicated to LTE services in some markets, while Sprint recently announced its Spark program that will see it tie together its 800 MHz, 1.9 GHz and 2.5 GHz spectrum assets to support LTE speeds in excess of 50 megabits per second.
Rumors surrounding a Sprint/T-Mobile US deal are nothing new. Prior to both companies recent merger and acquisition activity there was talk in 2011 that the carriers were looking at a possible deal. Analysts have predicted that such a deal will eventually need to take place and with new leadership recently installed at the Federal Communications Commission those talks are expected to heat up.
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