updated 10:15 pm EDT, Sun September 13, 2009
Deutsche Telekom mulling Sprint takeover
T-Mobile's root company Deutsche Telekom is more seriously considering buying Sprint in what could be a major shakeup of the US cellphone industry, according to sources. The two have been rumored in talks for such a deal for over a year, but tips to the Telegraph now have the German firm bringing in financial advisers from Deutsche Bank to evaluate the possibility of making a bid for the ailing but still larger American provider. An offer could be made as soon as within a few weeks, the insiders said, though the likely terms of the deal haven't been mentioned.
Exact reasons for the deal also haven't been specified, though it's considered probable that Deutsche Telekom is unhappy with T-Mobile's status in the market compared to rivals. The US division has been stalled in fourth place behind Verizon, AT&T and Sprint for years and in its most recent fiscal quarter showed relatively stalled progress, with near-flat operating income year over year and a sharp drop in the number of new subscribers. It added 325,000 new customers in the spring where second-place AT&T added three times as many in the same period.
None of the involved companies have agreed to comment on the validity of the rumor.
Any successful takeover would likely require a major infrastructure switch at Sprint. T-Mobile USA's network relies on GSM for calling as well as HSPA for 3G data where Sprint uses the incompatible CDMA and EVDO standards. As such, T-Mobile would need to either continue running Sprint's existing network until a common standard like Long Term Evolution (LTE) is available or else replace Sprint's existing network and give customers replacement phones.
If put through and approved by antitrust regulators, a deal would leave the combined entity with 78.2 million subscribers, or just behind AT&T's 79.6 million, and would create a tighter three-way competition for the US market. It would also give T-Mobile much stronger leeway for negotiating handset exclusives. While it has been successful in being the lead carrier of Android devices, its smaller size and slow-to-start 3G buildout are widely believed to have hurt its chances at exclusives for smartphones from Apple and Research in Motion, both of whom usually prefer to hand special deals to the largest carriers.
T-Mobile has already signaled its willingness to make similar moves elsewhere with a plan to merge with Orange in the UK and eclipse rivals like O2 or Vodafone.