Sprint, T-Mobile said to be reexamining merger strategy following meetings with government officials

Alex Wagner
Editorial Director of News and Content from  Omaha, NE
| February 10, 2014

Sprint logo CTIA

After word first got out in mid-December that Sprint was considering a T-Mobile acquisition, details of the potential deal and its progress have leaked out on a fairly steady basis. We've heard that the combined SoftBank-Sprint had sought out financing for the deal, and more recently it was revealed that SoftBank CEO Masayoshi Son met with FCC Chairman Tom Wheeler and argued in favor of large mergers, just like the one that he's rumored to be working toward. Now it sounds as though Sprint and T-Mo may be planning to take a step back from the deal to regroup and reformulate its plans after regulators criticized the potential tie-up.

Sources speaking to The Wall Street Journal say that Sprint and T-Mobile are now working to decide whether or not they should continue to pursue a merger after government officials have cast doubt as to whether or not they'd approve such a deal. SoftBank CEO Masayoshi Son is said to still be interested in going after T-Mobile, but he reportedly won't continue his effort if it seems impossible. For now it's said that Sprint and T-Mo are regrouping and going over their strategy. If the two sides do decide to continue to push for a merger, it's expected that they'll take their time to perfect their arguments for approval.

T-Mobile's recent Uncarrier moves and subscriber gains have helped to turn it into a much more fierce competitor, which has led many to voice skepticism about a possible Sprint-T-Mobile tie-up. However, supporters of the deal suggest that T-Mo's gains won't last and that both it and Sprint will eventually lose out to AT&T and Verizon and the greater scale that they possess.

The merger's backers also say that a combined Sprint and T-Mobile could create a competitive network much more effectively than they could if they remained separate. As a result, they say that a combined Sprint-Mo would actually increase the number of legit competitors in the U.S. wireless industry from two to three, rather than shrink it from four to three.

AT&T attempted to acquire T-Mobile in 2011 but ultimately decided to end its pursuit of T-Mo after the FCC and Department of Justice tried to block the deal from reaching completion. The same concerns that affected that deal's chances of getting done seem to be in effect with this potential agreement between Sprint and T-Mobile. Many folks don't want to see the number of major U.S. wireless carriers drop from four to three, especially considering how T-Mobile has been performing as of late. That's a legitimate concern, though as I mentioned before, supporters of the merger would likely argue that the Sprint and T-Mobile don't bring any true competition to AT&T and Verizon since the latter two carriers are so much larger than the former two.

For now we'll just have to wait for Sprint and T-Mobile to reassess their situation and decide whether or not they want to continue to push for a merger. If they do, they'll certainly have a tough road ahead of them, especially after T-Mobile's recent announcement that the 869,000 postpaid customers that it added in Q4 2013 is the best that it's done in that area since 2005.

What do you think of this rumored Sprint-T-Mobile deal? If it were up to you, would you continue to pursue a merger?

Via The Wall Street Journal