The fourth largest telecom "Uncarrier" in United States, T-Mobile (TMUS) is looking to recreate some fond memories. Two years ago AT&T had tried to acquire T-Mobile, but failed and ended up paying a fortune as breakup fee.Now, Sprint too could be following its footsteps.
Sweet Breakup
Two years back, AT&T's (T) $39 Billion bid to acquire T-Mobile fizzled out as it did not get regulatory approvals. While it was a setback for AT&T, T-Mobile walked out with $3 Billion in cash, in conjunction with the mutually agreed sum as a Breakup fee.
That helped T-Mobile expand its spectrum, and enabled it to take the fight to AT&T and Verizon, (VZ) shattering to a large extent the high margins that bigger players enjoyed thus far in the telecom space.
This time around, that experience seems to have helped T-Mobile, who is now looking to secure their position no matter what the outcome of the current state of affairs turns out to be.
Deal or No Deal
Whether the merger between T-Mobile and Sprint (S) goes through or falls flat is a billion dollar question. Well it indeed is a billion dollar question because T-Mobile might be demanding exactly a Billion dollar as Break-up fee if the deal does not go through.
While that is indeed a good sign for investors, there is absolutely no need to speculate over what will happen if the merger does take place.
It might be a given, that if a smaller company merges with a larger company, the CEO of the larger company becomes the CEO of the combined entity. But that's not how it's likely to turn out in this case. The Charismatic CEO of T-Mobile John Legere is expected to be at the helm if the merger takes place. Not only that, Sprint Chief Executive Dan Hesse said last week it wouldn't bother him if he doesn't lead the combined company. Additionally, Brand T-Mobile, and most of its management team would also be kept intact post the merger. So, like I said, Deal or no Deal, T-Mobile surely stands to gain.
Worry For Sprint
It's a tricky situation for Sprint as its management now needs to decide whether to push for the merger now, or wait till the 2015 Spectrum Auctions. There are multiple factors at play like opposition by the government and changes to rules governing companies' spectrum holdings. While Sprint is battling fiercely with US regulators who are opposing this deal stating it would inhibit competition, It may have to end up sacrificing some of its spectrum holdings to silence the anti-trust authorities. Again, the management has to bear in mind, that waiting until the auctions, could take away its competitive position against AT&T and Verizon who together enjoy 2/3 rd of the Market share.
Conclusion
Sprint needs to revamp its offering to be more relevant in the first place. Its services are clearly perceived as more expensive than T-Mobile. In spite of that, It has not made profit in the last seven years and has lost over 0.3 million customers this year. T-Mobile during the same period have added 1.3 million customers and have already made some refreshing moves aimed at providing relief to the US customers from expensive contracts by other carriers. Amidst all the disagreement and opposition from others, both Sprint and T-Mobile seem to agree that a merger would suit both. And with Legere at the helm, it will surely be a driving force. However, the timing is the biggest factor now and with T-Mobile having secured both ends, it can continue focussing on how to delight its customers!
About the author:RavagadusBanker-Dreamer-Freelance writer| Currently 0.00/512345 Rating: 0.0/5 (0 votes) |
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