Feature Article

March 08, 2011

A Merger of Sprint and T-Mobile?

When you're the No. 3 and No. 4 wireless carriers in a competitive market, what are your options? Merge, maybe, if the rumors are to be believed.

SAI Business Insider has reported that Sprint is currently in talks to acquire T-Mobile, its smaller rival in the wireless carrier industry. Both companies have been taking a beating from larger competitors Verizon and AT&T as of late. (Bloomberg broke the news yesterday that Deutsche Telekom AG was “in talks” to sell T-Mobile USA, which it owns, to Sprint in exchange for a major stake in the combined entity, said people with knowledge of the matter.)

Sprint has 50 million subscribers and T-Mobile has 34 million. Combined, that's 84 million, almost as big as rivals AT&T and Verizon, which are above 90 million. In terms of dollars, T-Mobile USA may be worth $15 billion to $20 billion, according to Michael Kovacocy, an analyst at Evolution Securities in London. Sprint’s market value was $13.6 billion as of yesterday’s close.

Scale matters for buying equipment, negotiating deals with suppliers, handset makers, sales, service, marketing, and basically everything involved in the wireless business, notes Business Insider. A larger, combined company may have a better chance of attracting the hot hardware, such as Apple's iPhone.

So even though there would be a mess integrating Sprint and T-Mobile's separate brands, customer bases and wireless networks (readers may recall the debacle that was Sprint's merger with Nextel), it could work out in the end. (It ultimately worked out for Cingular and AT&T Wireless, for example.) Of course, it could also be a disaster, giving Verizon and AT&T even more of a lead.

Tracey Schelmetic is a contributing editor for MobilityTechzone. To read more of Tracey's articles, please visit her columnist page.

Edited by Tammy Wolf

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