Rumors seem to pop up every spring of a merger between Sprint-Nextel Corp. (S) and T-Mobile USA (DT). This year is no different – except for a few new factors (think “global economic recession”) that are prompting more than the usual speculation about an imminent tie-up between the two.
The worldwide recession clearly is bruising service providers, including wireless carriers, with falling subscriber numbers, a shrinking average revenue per user and lower monthly sales all adding to the struggles.
To be sure, T-Mobile parent Deutsche Telekom (DT) last month issued a profit warning in advance of its May 7 earnings call; meanwhile, Sprint continues to fight a poor customer service reputation and ever-declining financials. Plus, postpaid providers like Sprint and T-Mobile are getting beat down by the likes of MetroPCS (PCS) and Leap Wireless (LEAP), regional value carriers which sell prepaid, no-contract mobile service plans.
A combined Sprint and T-Mobile would overtake AT&T Inc. (T) as the second-largest carrier by total subscribers. It might make economic sense to join forces and emerge with a combined, strengthened position, but there are caveats if Sprint and T-Mobile – the third- and fourth-largest U.S. wireless carriers, respectively – do shoot for a deal. They’ll face challenges that include regulatory approvals, foreign ownership concerns (DT is Germany-owned, after all), and network integration hurdles.
To read more about those challenges, click here or on the source link below.