For almost eight months, Sprint had pursued to close on a deal with T-Mobile. Masayoshi Son, billionaire founder of SoftBank Corp, described the acquisition as an opportunity to gain stronger competition against the leading US providers AT&T Inc. and Verizon Communications Inc.
Sprint, ranked as the third carrier in the US, and T-Mobile are not totally abandoning their plans to consolidate in the future. Both companies understand that the deal is something which is impossible to achieve at this time. Moreover, US regulators wanted to maintain only four major wireless carriers.
The deal, which involved the merging of the third and the fourth largest US wireless carriers, had been facing antitrust issues which may have been too much to handle for the key players. If the plan pushes through, the deal would create a company that is large enough to challenge the dominant positions of Verizon and AT&T which can eventually tighten up the competition. The regulators believe that an increase in the competition would result in the rising of market prices for customers.
In 2011, AT&T needed to abandon the $39 billion deal to acquire T-Mobile. Regulators tried to block the acquisition due to antitrust issues.
Now, it was Sprint's turn to abandon pursuing T-Mobile. The company realized that regulatory constraints are becoming hostile and insurmountable. In the end, everything will only be a pointless antitrust struggle.
The decision to drop the merger was made at a Sprint board meeting on Tuesday. It is, by far, the second failed attempt of a large American wireless carrier to enter a merger in three years. Likewise, it was also a serious blow to Softbank as its plan to challenge the two reigning US carriers ended up in vain.
Several questions are now raised on how Sprint and T-Mobile plan to move on knowing that at this point, they remain as smaller competitors in the industry. When merged, the two companies would control less than a third of the wireless market in the US.
Research analyst Craig Moffett from MoffettNathanson said that Sprint has a lot of wood to chop. "They will have to spend a fortune to fix their network, and they will very likely have to cut prices to stay competitive at the same time."
Sprint's turnaround plan is focused on updating its network and concocting new pricing schemes for consumers. The company is also naming a new chief executive who will replace Daniel Hesse.
