Sprint (NYSE: S) may have found a buyer. The interested party is German phone giant Deutsche Telekom NYSE: DT). DT owns the fourth largest cellular carrier in the US. Sprint has the third largest network, but has struggled to keep subscribers since it bought rival Nextel. The M&A action would be brilliant for both companies.
Sprint’s shares are trading at $7.81 down from $25 less than two years ago. The firm has had financial troubles because of customers losses and has fallen well behind AT&T (T) and Verizon Wireless. Combining Sprint and T-Mobile would create a strong, third competitor in the US market. It would be the largest cell operator with 50 million customers from Sprint added to 28 million of its own.
Sprint has no solution to building out a 4G network that will allow it to remain competitive a less than a decade from now. Its plans to spend $5 billion on a national WiMax grid have been slowed and perhaps killed by the company’s financial and operational problems.
Reuters points out the the German government, which still owns a third of DT might not approve a deal. But, without one T-Mobile will never be a force in the US market and Sprint will languish in the third place spot while its better-funded and better-operated competitors pull further ahead.
Douglas A. McIntyre