Sprint and T-Mobile Merger Could Take Longer as Sprint Reassesses Strategy
In what could be another blow for a proposed Sprint takeover of T-Mobile, Sprint executives are reportedly reassessing their game plan in light of opposition from both the U.S. Justice Department and Federal Communications Commission (FCC).
According to The Wall Street Journal, people familiar with the matter say Sprint Chairman Masayoshi Son and CEO Dan Hesse will probably continue to pursue the deal due to the fact Sprint's future is limited unless it becomes a larger carrier. However, the deal could take a few weeks longer to hammer out after public opposition from the Justice Department's Antitrust Division and FCC.
Softbank-owned Sprint is the nation's third largest carrier, while T-Mobile is the fourth. Even with their combined customer base, they still fall short of number two AT&T's 110 million customers. Verizon is the largest wireless carrier in the United States with around 145 million subscribers.
FCC Chairman Tom Wheeler recently voiced his concerns in a meeting with Sprint board members, stating that the government is wary of consolidation on this scale. However, Sprint, and even T-Mobile, argue that in order for them to better compete against Verizon and AT&T (the top two carriers account for 75 percent of the wireless market share, according to Bloomberg data), they should be allowed to combine forces.
"If the government wants us to have a competitive environment, you are going to make sure that the duopoly doesn't use their prowess to crush the little guys and have this sub-1 GHz spectrum be moved all to them," T-Mobile CEO John Legere said during a television interview on Bloomberg West.
"We're all going to need better scale and capability. The question starts to be: How do you take the maverick and supercharge it? We either need more spectrum and capability, a lot more investment, or we need consolidation."
The Justice Department also came out earlier in January saying that the argument simply isn't convincing enough. Changing the landscape from four major national carriers to three could possibly lead to higher costs for the consumer.
T-Mobile offers the cheapest average monthly cost, according to data from Cowen and Company, and the carrier's UnCarrier strategy has made it a popular dark horse in the wireless market. In 2011, the Justice Department struck down a proposed $39 billion deal from AT&T for T-Mobile, stating that T-Mobile is a "self-described 'challenger brand,' that historically has been a value provider."
Sprint also opposed the 2011 deal, stating: "Removing T-Mobile from the market would substantially reduce the likelihood of market disruption by a maverick. T-Mobile, as one of only four national carries, provides a critical constraint on AT&T's consumer retail prices."
It was recently reported that Sprint is close to obtaining the necessary financing for the deal.