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July 13, 2010

'There is a Logic' to a Sprint, T-Mobile USA Merger, CEO Says

By Gary Kim
Contributing Editor

Executives at T-Mobile (News - Alert) USA and Sprint are not blind to the market share dynamics of the U.S. mobile industry, which have Verizon Wireless and AT&T holding about 56 percent market share between them, with recent subscriber growth negative for all but AT&T and prepaid mobile virtual network operators. 
 
At the end of the first quarter of 2010, T-Mobile USA and Sprint held 12-percent share each. It is no secret that T-Mobile USA needs a 4G strategy, while Sprint might need a way to layer Long Term Evolution services atop its existing WiMAX 4G network. 
 
Indeed, reports the Financial Times, Sprint CEO Dan Hesse said there was a "logic" to a merger between Sprint and T-Mobile USA if they were both using the same 4G technology.'
 
Nobody expects any moves this year, perhaps not even in the couple of years, but a merger between Sprint and T-Mobile USA, as difficult as it would be to meld all the air interfaces, cannot be excluded from possibility. Such a deal would be easier if both T-Mobile and Sprint shared a common air interface. 
 
And Clearwire (majority owned by Sprint) executives have been saying they can deploy LTE (News - Alert) alongside WiMAX, should they decide to do so. "We have the spectrum resources where we could add LTE if we choose to do that, on top of the WiMAX network," Hesse reportedly said.  "The beauty of having a lot of spectrum is we have a lot of flexibility."
 
Some analysts believe Sprint and T-Mobile USA cannot compete effectively against their larger rivals from their respective independent positions, and that a merger is the best solution. That doesn't mean it is not the only potential course for either company to take, or an especially easy course. 
 
But the maturing mobile business will rely increasingly on scale economies, and three evenly-matched contestants is a scenario many observers think is stable over time. But 'logic' is not inevitability, nor apparently imminent.
 
By at least some accounts, Deutsche Telekom took a serious look at a Sprint acquisition in 2008. The difficulties of melding so many different air interfaces seem to have been a consideration. 
 
Perhaps the best analogy, though, is the nearly-constant rumors of Apple's (News - Alert) iPhone being available at Verizon Wireless. The speculation never ceases. Of course, some would say, the rumors ultimately will prove correct. Few likely believe Verizon Wireless will 'never' be able to sell the Apple iPhone (News - Alert). 
 
Perhaps few believe the current four-company leadership of the U.S. mobile industry, with all four current providers, will last 'forever,' either. In an industry that has been consolidating globally, for more than a decade, virtually everybody likely believes there will be fewer contenders in every segment, over time. 
 

Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary's articles, please visit his columnist page.

Edited by Juliana Kenny


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