T-Mobile plans to merge with Sprint Nextel to take on AT&T and Verizon Wireless in the U.S., according to Monday’s The Daily Telegraph. The rumors come on the heels of a T-Mobile-Orange merger in the United Kingdom.
The Telegraph is reporting that T-Mobile’s parent, Deutsche Telekom AG, could submit a bid for Sprint within the next few weeks. Sprint’s current market value is $10.8 billion with debt of $21 billion. Sprint shares climbed 10 percent Monday in the wake of the reports.
Sprint is the third-largest U.S. wireless carrier behind Verizon with 80 million subscribers and AT&T with 78 million subscribers. T-Mobile is the fourth-largest. If Sprint and T-Mobile merged, they would battle with AT&T for second place.
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Such a merger would have economies of scale in terms of gross subscriber numbers, but not in terms of networking technology, according to Avi Greengart, an analyst at Current Analysis. That’s because the two companies promote multiple wireless standards.
Sprint’s Nextel brand phones run on the iDEN network while Sprint-branded phones run on CDMA. Meanwhile, Sprint is promoting Wi-MAX for its 4G agreement with Clearwire. T-Mobile uses GSM for 2G and GSM in the 1700 band, which is fairly unique globally, for 3G.
“If T-Mobile acquired Sprint, they’d have a tremendous amount of spectrum assets, but they’d have them all over the place being used with lots of different interface technologies,” Greengart said. “Figuring out strategically which ones to keep and which ones to ditch and how to get from point A to point B would be a mess.”
According to Zacks Investment Research, T-Mobile’s larger competitors deliver services more cost-effectively. The result is that T-Mobile is losing market share. T-Mobile had 15 percent market share in 2007. That declined to about 12 percent at the end of 2008.
Meanwhile, Sprint has struggles of its…