T-Mobile parent firm to buy out Sprint?

T-Mobile's head company Deutsche Telekom may consider buying Sprint and shake up the industry as a result, according to an investment note by Merrill Lynch. The financial group claims that economic circumstances may pressure the German phone company into making a move for the American company. Chief among these is a recently introduced unlimited Sprint plan that offers both voice and data. By pushing the prices downward, Sprint may trigger a price war that T-Mobile USA cannot sustain, pushing Deutsche Telekom to acquire Sprint and prevent the carrier from dropping prices beyond where T-Mobile can compete.

Sprint's worsening losses and a weak US dollar may also make for a likely buyout, as it would make any transaction relatively affordable, Merill Lynch analysts say.

Any acquisition of the kind would create a tremendous shift in the US cellular market, which is split primarily between five major carriers that would be reduced to four -- Alltel, AT&T, T-Mobile, and Verizon -- in the event of a merger. The change would also create a difficult transition period for customers of one service or the other, as T-Mobile would have to consider either discontinuing Sprint's CDMA phone network or its own GSM-based service to supply a unified network.

It would also create problems with the iDEN push-to-talk network Sprint inherited from Nextel, which itself is not compatible with either CDMA or GSM but is often used by specific US businesses, such as the construction industry.

None of the involved companies have comented on the report.

Filed under: industry
Other story tags: AT&T, Verizon, T-Mobile, sprint