In recent action, shares of Sprint (S 4.24, +0.47, +12.47%) rose 39 cents to $4.16. Deutsch Telekom’s (DT 13.74, -0.13, -0.94%) U.S.-listed shares fell a few pennies to $13.79.
The U.K. Telegraph reported Sunday that Deutsche Telekom had hired an adviser explore a potential bid for Sprint. A Sprint spokesman declined to comment.
Rumors of a tie-up between Sprint, the No. 3 mobile operator in the United States, and T-Mobile, the No. 4 carrier, have circulated for several years
Both companies have fallen far behind market leaders Verizon Wireless and AT&T Inc. (T 26.47, -0.19, -0.71%) with little prospect of catching up. The maturation of the U.S. wireless market and forecast for lower long-term growth has put further pressure on Sprint and T-Mobile.
Yet a marriage between the two companies might not be a panacea and also could be difficult to pull off. The two companies use at least three incompatible wireless technologies, cater to different parts of the market and have distinct corporate cultures.
If a Sprint and T-Mobile merger experienced any major hiccups, the combined company could fall further behind Verizon and AT&T, analysts say.
Analyst Craig Moffett of Bernstein wrote in a note that the U.S. wireless industry is “crying out for consolidation,” but he also cautioned that “consolidating T-Mobile and Sprint would be dauntingly complex.”
Sprint’s experience with its $35 billion acquisition of Nextel in 2005 illustrates the point. The two companies promised their merger would help them better compete with AT&T and Verizon. Instead, they failed to meet most of their top goals, including a vow to combine their networks.
Since then, Sprint has lost millions of customers to its larger rivals — owing in large part to network disruptions triggered by the merger.
“Look at how that merger has worked,” said wireless consultant Jane Zweig of the Shosteck Group, an original skeptic of the 2005 deal.
The integration of T-Mobile and Sprint would be even more complex, she added. “Who is this helping, Wall Street? I don’t see consumers benefiting at all.”
What’s more, T-Mobile and Sprint could face hurdles on the regulatory front. Under a Democratic White House for the first time since 2001, regulators have stepped up their probes of potentially anticompetitive practices. The Federal Communications Commission, for example, is already examining the wireless market.
Regulators would scrutinize any deal, especially one that involves a foreign buyer of key U.S. telecom assets, analysts say.
If the two companies went ahead anyway, the combined entity would have more than 70 million customers. Verizon is the U.S. leader with more than 80 million subscribers, followed by AT&T with about 78 million.
Verizon Wireless is a joint venture of Verizon Communications Inc. (VZ 31.00, -0.26, -0.83%) and U.K.-based Vodafone Group PLC. (VOD 23.08, -0.12, -0.56%)
