Wednesday, May 18, 2011

What Happens to Sprint?

Dan Hesse, CEO of Sprint/Nextel testified last week before the Senate committee investigating the AT&T/T-Mobile acquisition that if the deal goes through, Sprint will become a takeover target. Of course our biggest fear is that Verizon Wireless will be the most likely acquirer. But political winds just may prevent that from happening. So, who gets Sprint?

Bloomberg Business reported Monday it will most likely be CenturyLink. CenturyLink is the 3rd largest wireline player and they need a wireless outlet and they have the money. This leads us to question why can't Centurylink be the knight in shining armor to ride in and pick up T-Mobile?

A review of T-Mobile's part of the application to the FCC gives a strong clue. T-Mobile wants to remain a strong wireless player in the world and intends to improve their global position not just with the $39 Billion that AT&T will give them, but also with the 5% ownership stake in AT&T with all the technical and financial perks that come with it. T-Mobile doesn't want to become the wireless arm of a smaller wireline company, they want a piece of the action at the Big Boys table, and hooking up with AT&T gets them admission to the Big Game.

The good news is that Centurylink would probably be a good steward of Sprint's spectrum and could be a good value among wireless players. Centurylink's pricing philosophy follows an 'everyday low prices' avenue and may set its pricing to more compete with MetroPCS and Cricket. It will take time for conditions to be ripe for anyone to acquire Sprint, and in that time it might, gulp, be financially prudent for Sprint to make a few acquisitions of their own. Say it isn't so.

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