updated 08:17 pm EDT, Tue August 5, 2014
Obstacles in regulation are said to be the reason for Sprint's withdrawal
The Wall Street Journal is reporting that T-Mobile's possible purchase by Sprint may no longer be on the table. Sources tell the publication that Sprint's parent company, SoftBank, no longer believes that it would be able to convince regulators that the merger of the two companies would be favorable to the wireless industry. It's believed that officials had given enough of a signal that it would oppose any change in the current wireless market.
Sources indicate Sprint will make an announcement on Wednesday regarding its decision to withdraw the bid on one of the four major carriers in the United States. However, that doesn't mean that Sprint is giving up on the the idea of the consolidating the wireless market. For the time being, sources state that Sprint believes that it has made enough improvements in its network to maintain short-term feasibility.
It's also said that Sprint will be replacing their their top executive. Dan Hesse, who has been CEO of the company since 2007, is said to be leaving, replaced by Brightstar founder Marcelo Claure. SoftBank spent $1.26 billion for a majority stake of Brightstar in 2013.
Sprint's agreement with T-Mobile, which was outlined at the beginning of June, would have seen the third- and fourth-largest wireless carriers being combined for a sum of $32 billion. SoftBank would control the majority of the combined company, with T-Mobile's parent Deutsche Telekom owning between 15 and 20 percent. The deal was expected to be paid for in equal parts cash and stock.
It's unclear if Sprint pulling out of the deal would mean a payout for T-Mobile. The agreement from June indicated that $1 billion would be paid out by Sprint if the deal was cancelled, or failed to pass through regulation. If it was a legal contract, the result wouldn't be unlike what happened in 2011, when AT&T's bid for T-Mobile was abandoned. AT&T ended up paying T-Mobile $4 billion in cash and spectrum.
The news comes after information that T-Mobile was considering not pursuing a bid from France's Iliad SA. Iliad tendered an offer valued at $33 per share to purchase part of Deutsche Telekom's holdings, for a total of $15 billion. Sources indicated that the offer was to purchase 56.6 percent of T-Mobile as Iliad looked for other partners.