4 major hurdles for Sprint, T-Mobile merger

A deal to combine the No. 3 and No. 4 carriers is just in the rumor phase at this point.

By Benzinga Dec 16, 2013 4:01PM
People walk by a T-Mobile store on April 12, 2013 in New York City (© Spencer Platt/Getty Images)By Tim Parker

On Friday, rumors began circulating that Sprint (S) was preparing a bid for small rival T-Mobile (TMUS).


Even if the rumors are true, it doesn't appear that Sprint would make an offer until sometime during the first half of 2014.


But a rumor that likely wouldn’t come to fruition until sometime next year was enough to send the stock nearly 9 percent higher on the day -- the largest one-day move for T-Mobile in more than one year.


The deal would combine the No. 3 and No. 4 carriers by revenue, leaving the combined company still holding onto the No. 3 spot.


If the deal took place, the combined company would still be relatively small by cell phone company standards. The new company would have roughly 57 million subscribers compared to Verizon's (VZ) 95 million and AT&T's (T) 72 million.

Still, even a company slightly more than half the size of the top carrier would have a tough time gaining regulatory approval along with other problems, according to a flurry of reports published over the weekend.


When AT&T tried to purchase T-Mobile, the Justice Department turned down the 

merger because of the lack of competition it could create.

With T-Mobile merging with MetroPCS earlier in the year and Softbank now owning 80 percent of Sprint, there has already been consolidation in the industry that would make a deal like this even more unlikely.


Deutsche Telekom owns a 67 percent stake in T-Mobile and, according to Bloomberg, could only sell its stake within 18 months of its acquisition of T-Mobile if an offer was made for the entire stake.


There are also technology issues.


Sprint runs a CDMA network similar to Verizon’s while T-Mobile's network GSM and HSPA+. If you’re not a cell phone techie, simply put, phones made for one network won’t work on the other meaning that a major investment into integrating the technologies is necessary.


Then there's the fact that both of these companies are small and a merger, while interesting from a financial markets perspective, still leaves a company that isn’t likely to gain a lot of ground against AT&T and Verizon. There's an Apple (AAPL)/Samsung-style duopoly in the U.S. cell space with AT&T and Verizon. Most people agree that it's not likely that any merger would so much to change that any time soon.


Disclosure: At the time of this writing, Tim Parker was long Apple and Verizon.


More from Benzinga
3Comments
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
265
265 rated 2
429
429 rated 3
612
612 rated 4
499
499 rated 5
525
525 rated 6
701
701 rated 7
533
533 rated 8
337
337 rated 9
131
131 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
COPCONOCOPHILLIPS9
TAT&T Inc9
DVNDEVON ENERGY CORPORATION9
EOGEOG RESOURCES Inc9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.