Sprint, T-Mobile Heading for Imminent Tie-Up?
1:04 AM Posted by MH
Analysts Address Another Round of Merger Rumors
Just like daffodils and crocus, rumors seem to pop up every spring of a merger between Sprint-Nextel Corp. (S) and T-Mobile USA. Spring 2009 is no different – except for a few new factors (think “global economic recession”) that are prompting more than the usual speculation about an imminent tie-up between the two.
“A merger may become an inevitable next step” if the two firms grow weaker due to the economy and intense competition, said Medley Global Advisors analyst Jessica Zufolo. That’s because the worldwide recession clearly is bruising service providers, including wireless carriers, with falling subscriber numbers, a shrinking average revenue per user and lower monthly sales all adding to the struggles.
To be sure, T-Mobile parent Deutsche Telekom (DT) last week issued a profit warning in advance of its May 7 earnings call; meanwhile, Sprint continues to fight a poor customer service reputation and ever-declining financials, about which we’ll learn more during the company’s May 4 earnings call. Plus, postpaid providers like Sprint and T-Mobile are getting beat down by the likes of MetroPCS (PCS) and Leap Wireless (LEAP), regional value carriers which sell prepaid, no-contract mobile service plans.
However, a combined Sprint and T-Mobile would overtake AT&T Inc. (T) as the second-largest carrier by total subscribers, Zufolo said. Sprint Nextel has 49 million users and T-Mobile has 32.8 million. AT&T counts 78.2 million. Verizon Wireless (VZ) would remain top dog with 85.7 million subscribers.
It might make economic sense to join forces and emerge with a combined, strengthened position, but there are caveats if Sprint and T-Mobile – the third- and fourth-largest U.S. wireless carriers, respectively – do shoot for a deal. They’ll face challenges that include regulatory approvals, foreign ownership concerns (DT is Germany-owned, after all), and network integration hurdles.
“A merger may become an inevitable next step” if the two firms grow weaker due to the economy and intense competition, said Medley Global Advisors analyst Jessica Zufolo. That’s because the worldwide recession clearly is bruising service providers, including wireless carriers, with falling subscriber numbers, a shrinking average revenue per user and lower monthly sales all adding to the struggles.
To be sure, T-Mobile parent Deutsche Telekom (DT) last week issued a profit warning in advance of its May 7 earnings call; meanwhile, Sprint continues to fight a poor customer service reputation and ever-declining financials, about which we’ll learn more during the company’s May 4 earnings call. Plus, postpaid providers like Sprint and T-Mobile are getting beat down by the likes of MetroPCS (PCS) and Leap Wireless (LEAP), regional value carriers which sell prepaid, no-contract mobile service plans.
However, a combined Sprint and T-Mobile would overtake AT&T Inc. (T) as the second-largest carrier by total subscribers, Zufolo said. Sprint Nextel has 49 million users and T-Mobile has 32.8 million. AT&T counts 78.2 million. Verizon Wireless (VZ) would remain top dog with 85.7 million subscribers.
It might make economic sense to join forces and emerge with a combined, strengthened position, but there are caveats if Sprint and T-Mobile – the third- and fourth-largest U.S. wireless carriers, respectively – do shoot for a deal. They’ll face challenges that include regulatory approvals, foreign ownership concerns (DT is Germany-owned, after all), and network integration hurdles.
Full article here http://www.xchangemag.com/articles/sprint-t-mobile-heading-for-imminent-tie-up.html
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