US operator Sprint is readying a bid of more than $20 billion for smaller rival T-Mobile US, according to a report from Dow Jones Newswires.
Citing people familiar with the matter, the newswire says Sprint is currently studying regulatory concerns but could launch a bid in the first half of next year.
A takeover would combine the country’s third- and fourth-biggest players to create a stronger rival to market leaders AT&T (Dallas, TX, USA) and Verizon Wireless (New York City, NY, USA).
But it could face strong opposition from regulatory authorities in the US, which fear a tie-up would lead to rising costs for consumers and a slowdown in the pace of network deployment.
Two years ago, the US Justice Department blocked a $39 billion takeover of T-Mobile (Bellevue, WA, USA) launched by AT&T, worried that the disappearance of the number-four player would represent a setback for the competitiveness of the market.
Since then, T-Mobile has completed a merger with MetroPCS, while Japan’s SoftBank (Tokyo) has acquired more than 80% of Sprint.
Neither of those deals faced regulatory opposition because they did not involve tie-ups between any of the top four companies by customer numbers.
According to Dow Jones, SoftBank chief executive Masayoshi Son is the driving force behind a possible bid for T-Mobile.
Sprint has previously been linked with interest in T-Mobile as it looks to build up its network and spectrum resources and mount a stronger challenge to AT&T and Verizon Wireless.
T-Mobile has been trying to reinvigorate its business by launching new, lost-cost tariffs for contract customers and increasing investments in the rollout of its 4G network, which has lagged those of AT&T and Verizon Wireless in terms of coverage.
Nevertheless, majority owner Deutsche Telekom (Bonn, Germany) is thought to be interested in quitting the US market and focusing resources on its domestic and European operations.
Although a combination of Sprint and T-Mobile would remain a long way behind either of the market leaders on customer numbers, its network and spectrum assets could make it a formidable rival.
Sprint recently completed the takeover of spectrum-rich Clearwire (Bellevue, WA, USA) – in which it had previously held a majority stake – and is likely to benefit from the expertise and resources of SoftBank as it continues to roll out its 4G network.
In that respect, the companies may be keen to execute a merger in advance of the incentive auction of 600MHz spectrum, which authorities recently postponed until 2015, having originally planned to sell airwaves that are currently used by the broadcasting industry sometime next year.
Clearly, a merger of Sprint and T-Mobile would have a markedly different auction strategy from either of the two players on a standalone basis.