How many wireless carriers do we need? It’s a question that’s popping up again as T-Mobile USA is said to be looking at buying Sprint Nextel Corp.
Now that most people have a cell phone and once-heady growth in the industry is slowing, analysts say carriers are going to be looking at buying each other to increase their scale and to avoid competing too much on price. Consumers have been benefiting from relentless price-cutting on cell phone service in the past few years.
But consolidation doesn’t come easy to the industry, and the government may not look kindly on the combinations that reduce competition.
U.K.’s Sunday Daily Telegraph reported that T-Mobile USA’s owner, Deutsche Telekom AG, has hired banking advisers to explore a bid for Sprint Nextel Corp.
It’s not the first time there has been talk of such a combination, and the buyer would have significant hurdles to overcome. But if it were consummated, analysts say, it could at least momentarily put the price-slashing on hold.
“The U.S. wireless market is crying out for consolidation,” Sanford Bernstein analyst Craig Moffett told investors in a research note Monday. He added that “there are too many cooks in the kitchen.”
Deutsche Telekom and Sprint wouldn’t comment.
Sprint’s stock jumped on the news, gaining 38 cents, or 10 percent, to close at $4.15, giving it a market capitalization of $11.7 billion. Deutsche Telekom’s U.S.-listed shares fell 8 cents, or 0.6 percent, to $13.79.
This year has seen dramatic price cuts on wireless service, particularly for customers who don’t have contracts and go month to month on “prepaid” plans. Sprint, through its Boost Mobile brand, introduced a $50 prepaid unlimited-calling plan in January. Virgin Mobile followed suit, and regional upstarts Leap Wireless International Inc. and MetroPCS Communications Inc., which were already around the $50 mark for unlimited service, have trimmed prices…