Sprint, T-Mobile call off merger plans
Sprint is expected to announce Wednesday that its sought-after merger with T-Mobile is off.
The wireless carrier and its parent company, Softbank, decided that regulatory hurdles were too high, The Wall Street Journal reported Tuesday, citing people familiar with the matter.
Also possible tomorrow: Sprint could announce a new CEO to replace Dan Hesse, who took over there in 2007, according to Bloomberg, which cited a person who did not want to be named.
Sprint, the third-largest wireless carrier, and T-Mobile, the fourth-largest, had been working on a deal for months that was valued at between $31 billion and $50 billion at various times. But last week French telecom company Illiad made a bid for control of T-Mobile for $15 billion in cash.
That offer may have helped sink the merger, says Jackdaw Research analyst Jan Dawson. “The Iliad offer might do two things: speed up the timing and increase the price,” he said.
T-Mobile has a lot of valuable spectrum and is a catch, Dawson says. “It has lots of headroom in terms of expansion and it (has) good holdings across the country, especially since its purchase of MetroPCS.”
But federal regulators at the Justice Department and the Federal Communications Commission have been concerned about increased consolidation of the wireless market. “Ultimately it’s been clear that the regulatory hurdles for Sprint to get a deal done with T-Mobile were pretty high,” Dawson said.
Added Craig Moffett, senior research analyst at MoffettNathanson, “the deal never had a chance in Washington. Sprint seems finally to have accepted the inevitable. The big winner here is the FCC. They keep their four-player market and they take a big step towards a successful spectrum auction next year with four independent bidders.”
Both companies declined comment on the report and shares of each plunged after it hit. Sprint shares dropped 16% to $6.10, while T-Mobile fell 8.6% to $31.
Many had expected Hesse to leave after the merger, “but it’s a bit surprising to have it happen so soon,” Moffett said. “But a lot of his top lieutenants have been leaving.”
A possible successor, Nikesh Arora, who just left Google to go to SoftBank. “His role doesn’t seem clear yet. He has a long background in telecoms … so I think he’d be an obvious choice for new CEO at Sprint. There really isn’t anyone obvious in the current executive ranks at Sprint to take over.”
Source: Usatoday
