There are reports that Sprint is contemplating on acquiring the 'Uncarrier' T-Mobile, owned by Deutsche Telekom AG. Such a move will mean there will only be three big players in the telco industry with Verizon hoarding 95 million postpaid subscribers, AT&T with a share of 72 million, and the Sprint and T-Mobile accounting for 53 million. However, anti-trust issues might hinder the move.
According to The Wall Street Journal that first reported about the issue, there are no formal bids yet and the Softbank-owned Sprint is still studying any legal or regulatory impediments that may come up.
"A deal could be worth more than $20 billion, depending on the size of any stake in T-Mobile that Sprint tries to buy," the report of the WSJ read."Driving the current effort is SoftBank Chief Executive Masayoshi Son, an aggressive acquirer who bought control of Sprint in July and now owns more than 80% of Sprint."
Sprint, however, is not the only carrier that has set its sight on T-Mobile. AT&T attempted to acquire T-Mobile for $39 billion in 2011 but the deal fell flat when the federal regulators got involved.
The words of the chairman of the Federal Communications Commission (FCC), Tom Wheeler, might provide hint to the present stance of the government.
"The mobile business is today, with four carriers, a competitive business, and it's important it stay that way," Wheeler said during a speaking engagement in Ohio.
T-Mobile has been making life easier for phone users in recent years with the innovation of its offerings. It was the first to introduce no contract deals and plans that will allow its customers to upgrade their handsets twice annually. With such aggressive moves, the uncarrier has become a driving force in the telco industry forcing the bigger providers to offer similar products and services.
As for Sprint, regulatory hurdle is not the only thing it has to worry about. Even if the regulators approve it, it will also not be an easy road ahead because T-Mobile is on GSM while Spring operates on CDMA and consolidating their networks and upgrading the systems will not be an easy endeavour. One must also consider the debt load that might be part of the deal.
Transparency groups such as Public Knowledge are also not in favor of Sprint's acquisition of T-Mobile.
"A stronger third-place competitor, better able to keep AT&T and Verizon in check, might sound appealing. But it's not worth the price of losing the number four competitor. A market with only three major carriers would be much more prone to 'coordinated effects' where 'competing' companies act as an effective cartel, even if they don't meet secretly to split up the market. All they need to do is match each others' pricing moves and pay attention to press statements and you have the same result as an illegal cartel without any lawbreaking," attorney John Bergmayer of Public Knowledge, wrote. "This is just as bad for consumers."
Shares of Sprint closed up 3.44 percent at $8.43 on the NYSE on Friday. Shares of T-Mobile US also surged 8.65 percent to close up at $27.64.
