Rumors of Sprint’s interest in acquiring smaller rival T-Mobile US seem to be hitting a regulatory wall as reports indicate little support for such action from government officials.
Reuters reported that current Federal Communications Commission Chairman Tom Wheeler has “expressed expressed his skepticism about a potential merger” between the nation’s No. 3 and No. 4 carriers in meetings with Sprint Chairman Masayoshi Son, citing an FCC official. Son, who is also chairman and CEO of Japan’s Softbank, picked up a controlling stake in Sprint last year.
The Reuters story notes that Son and Sprint CEO Dan Hesse recently met with Wheeler on the matter.
Rumors have been circulating for months – if not years – regarding a potential deal by newly embolden Sprint buying out Deutsche Telekom’s controlling interest in T-Mobile US. The deal would place a combined Sprint/T-Mobile US on near-equal footing size wise with the nation’s No. 1 and No. 2 operators Verizon Wireless and AT&T Mobility. Proponents of the deal claim such size parity is needed if there is to be a more formidable competitor for the current “big two.”
T-Mobile US has stoked the merger flames by stating it would be open to a potential transaction, while Sprint’s current operational malaise would seem to indicate it needs some sort of jolt to remain competitive with its rivals.
However, many observers doubt a deal between Sprint and T-Mobile US could be consummated under the current Democratic-led administration, with Wheeler noting at a speech in December that the current domestic wireless business was competitive with four carriers. This competitive nature has been bolstered over the past year by strong results from T-Mobile US, which fresh off its government-denied acquisition by AT&T in 2011, has posted customer growth numbers on par with the industry’s two largest operators.
“Obama Administration coolness toward a Sprint/T-Mobile deal appears to reflect a strong policy disposition on the structure of the mobile phone industry structure as broadly expressed in a numerical preference (four) of national carriers,” explained Jeff Silva, senior policy director of telecommunications, media and technology at Medley Global Advisors.
Despite those signs, there remain hints that Sprint may go ahead with at least putting the matter to the test, something that could force the government to file a lawsuit blocking the deal.
“It would be a high-risk strategy for Softbank and Sprint to pin their hopes on winning antitrust litigation if the U.S. government were to bring suit to block an acquisition of T-Mobile,” Silva added. “But it remains an option nonetheless, one with arguably greater promise than litigation held for AT&T in its pursuit of T-Mobile. If Sprint wanted to call [the Department of Justice’s] bluff and go forward with a T-Mobile merger, DoJ might be forced to deal with Sprint such that the transaction potentially could be cleared subject to conditions/concessions that might include keeping T-Mobile’s aggressive marketing and pricing (and maverick culture generally) intact in the combined entity.”
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