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Sprint, T-Mobile Deal May Face Regulatory Hurdles

Sprint, T-Mobile Deal May Face Regulatory Hurdles
December 16, 2013 10:24AM

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Softbank and Sprint would love to sink their teeth into T-Mobile. Buying T-Mobile would transform Softbank and Sprint into a much larger and much stronger third place competitor, especially since they are both reinventing themselves as we speak, said Jeff Kagan, an independent telecom analyst.

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T-Mobile has been shaking up the wireless industry with its so-called “uncarrier” moves. Verizon Wireless, AT&T and Sprint have all changed up how they package data and voice minutes since T-Mobile started pushing out innovative pricing schemes.

Now, it seems Softbank, which recently acquired Sprint, is ready to make another bold move in the U.S. wireless industry and T-Mobile is smack dab in the center of the mix. Sprint is rumored to be considering grabbing the U.S.’s fourth-largest carrier, which would give the combined company 98 million subscribers -- just 10 million fewer than AT&T and 3 million fewer than Verizon.

So far, it seems Softbank shareholders aren’t thrilled with the notion. The company’s shares dropped 3.2 percent at the close of trade in Tokyo. Maybe with the $21.6 billion the company already spent acquiring Sprint -- along with the $16 billion it plans to spend on the company over the next two years for faster wireless service -- has been enough for their risk tolerance.

Regulator Challenges

We turned to Jeff Kagan, an independent telecom analyst, to get his take on the rumors. He told us if Sprint does acquire T-Mobile it would transform the company into a larger and stronger number three competitor to both AT&T and Verizon Wireless virtually overnight. Whether the U.S. government would allow it is the question.

“I think Softbank and Sprint would love to sink their teeth into T-Mobile,” Kagan said. “It would transform them into a much larger and much stronger third place competitor, especially since they are both reinventing themselves as we speak.”

But history doesn’t bode well for Sprint in a possible acquisition. AT&T tried and failed to acquire T-Mobile a couple of years ago. The U.S. government would not allow the deal to go through because it wanted to keep four competitors in the space. Since then, T-Mobile, with its new CEO, has been working to rattle the market and has made an impact, forcing other carriers to change up their legacy wireless plans.

Wait and See

But, again, will the U.S. government allow it? If regulators stick with the logic that put the kibosh on the AT&T deal then there’s no chance of a Sprint, T-Mobile merger. However, it is possible that the courts have a different opinion in the current market climate.

“We’ll just have to wait and see what happens next. There is still quite a bit of ground to cover. First, Sprint and Softbank have to decide to make the attempt. Second, they have to get T-Mobile to buy in. Third, they have to convince the U.S. government to let them actually get together. And there are so many things that could get in the way,” said Kagan.

“So let’s take a breath and wait and see what happens next. The game hasn’t even started yet. Anyway, this will be interesting to follow, however," he said.

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