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Sprint To Challenge AT&T, Verizon Wireless as 'Disruptive Force'

By Craig Galbraith
October 17, 2012 - News

Sprint, which is poised to sell 70 percent of its business to Japan's SoftBank, might now have the cash and the corporate backing it needs to make serious gains on Verizon Wireless and AT&T, the wireless industry leaders in the U.S.

That's the determination of IHS iSuppli senior analyst Dexter Thillien, who noted this week that “by offering low-cost unlimited data plans with Long Term Evolution (LTE) service, Sprint could become a disruptive force in the U.S. wireless segment," as quoted by eWeek.

Assuming it is approved by regulators, SoftBank is spending more than $20 billion for its stake in Sprint, including a cash infusion that America's third-largest carrier might use to buy the rest of Clearwire – the spectrum-rich broadband provider of which it already owns 48 percent. Just a week earlier, T-Mobile USA – the fourth-largest wireless carrier – struck a deal to buy MetroPCS, the fifth-largest.

"Both of these agreements are intended to bolster the competitive positioning of relatively small wireless carriers in the North American wireless market, which increasingly is being dominated by the AT&T/Verizon duopoly," wrote Thillien.

It wasn't that long ago that Sprint, AT&T and Verizon Wireless were neck-and-neck in the mobile race. IHS data shows AT&T held 24 percent of the market in 2006, followed by Verizon's 23 percent and Sprint's 21 percent, eWeek said. But just five years later, Verizon had 30 percent AT&T 29 percent; and Sprint, just 15 percent. A disappointing merger with Nextel (and the financial struggles that ensued) was one big reason why. Another was no iPhone – the carrier didn't forge a deal with Apple until late last year. But the risk to commit billions of dollars to the iconic device has paid off; the company's stock price has nearly doubled this year and that improvement made it attractive for SoftBank's investment.

"AT&T and Verizon have followed a premium-pricing strategy when it comes to data services, leveraging their superior networks," Thillien added in his note to investors. "However, a resurgent Sprint with a strong network and low-cost unlimited data plans could put pressure on AT&T and Verizon’s wireless margins."

There is some speculation that Sprint will challenge T-Mobile with a better offer for MetroPCS, a company it appeared ready to buy earlier this year until the carrier's board reportedly rejected the deal at the 11th hour.

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