Sprint Eyes $20B T-Mobile Buyout

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Sprint wants to buy T-MobileSprint, the third largest cell service provider in the U.S. is looking at purchasing T-Mobile, the number four carrier, in a deal worth more than US$20 billion. Right now Sprint is looking into potential regulatory concerns, which seems prudent considering AT&T's failed attempt to buy the carrier in 2011.

News of the potential deal came via insider sources talking with the Wall Street Journal. They say that Sprint isn't yet committed to pursuing a buyout, but is considering the possibility.

The biggest hurdle to Sprint buying T-Mobile comes from U.S. regulatory agencies concerned about potential antitrust issues. Merging the two companies would put Sprint in a position where it could better compete with the top two carriers -- AT&T and Verizon -- but would also reduce the number of choices for consumers.

This isn't the first time T-Mobile has been a potential buyout option. AT&T tried to buy the carrier in 2011, but eventually gave up when the Department of Justice and Federal Communications Commission adamantly resisted the deal. The DOJ even went so far as to sue AT&T to block the deal.

While Sprint isn't nearly as large at AT&T, it could still face similar government resistance. If so, the carrier would most likely walk away from the deal or drop the idea of starting negotiations.

Assuming Sprint did buy T-Mobile, the combined company would hold 53 million customers, bringing it much closer to AT&T's 72 million. In comparison, Verizon serves 95 million customers.

Sprint and T-Mobile have both said they'd like to see government support for a merger so they can better compete with AT&T and Verizon. Government officials, however, seem to like the idea of a four carrier system in the U.S.

The DOJ made its position clear earlier this year when four carriers "is essential to maintain vigilance against any lessening of the intensity of competitive forces." That may be enough to keep Sprint and T-Mobile from getting to the negotiating table.

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Comments

aardman

I hope MO Spin is right about the DoJ’s attitude on competition in mobile carriers.  This is the same DoJ, after all, that for the first time ever in US history, sued the courts to restore a monopoly position that had been successfully torn down by a new entrant.  Yes, talking about eBooks, Amazon and Apple.

Benjamin Roethig

I can see three things happening here. 

1) The merger happens and Sprint takes the lead.  Sprint strips it for bandwidth and Dan Hesse undoes everything good TM-USA did to the market.

2) True Merger with T-Mobile USA.  Relaunches as SoftBank USA with John Legere (I think would get along better than Masayoshi Son with the very traditional Hesse).  Heese gets mostly ceremonial President position.

3) Feds or one of the parties so no way.

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