T-Mobile-MetroPCS Deal 'Piddling,' Sprint-Softbank Warrants a 'Wow'

By Craig Galbraith Comments

**Editor's Note: Please click here for a recap of the biggest channel-impacting mergers in Q3 2012 or here for the biggest M&A during that time in the service-provider and BSS/OSS spaces.**

With Japan-based Softbank reportedly in advanced talks to buy Sprint, the wireless industry might soon be turned on its ear.

It was only last week when the boards at T-Mobile (the fourth-largest U.S. carrier) parent Deutsche Telekom and MetroPCS (the fifth-largest) agreed to merge the two companies; the deal must still get through the regulatory process but is expected to make it. Just yesterday we learned that Sprint – in the middle of a significant comeback from financial peril and customer losses – is close to becoming part of Japan's Softbank, the Asian nation's third-largest mobile operator.

“Forget that piddling MetroPCS deal (at least for the moment); Sprint has found a bigger fish to fry," noted Yankee Group analyst Rich Karpinski. "With so much at stake – the veritable future of one of the world’s most advanced mobile markets – it should be no surprise to see such big deals on the table. Yet news of the talks still warrants a ‘wow.’

The Wall Street Journal reported earlier this year that Sprint was not much more than an eyelash away from making a big acquisition of its own — MetroPCS. But the company's board walked away from the deal, only to see T-Mobile step in and make a play for MetroPCS last week. With a cash infusion from Softbank, Sprint could consider offering MetroPCS more money, or perhaps buy up the rest of Clearwire, the mobile broadband provider which is already almost half-owned by Sprint.

Karpinski has mixed feelings about the proposed Softbank-Sprint merger.

" ...  it doesn’t do much to directly help Sprint catch up to bigger rivals AT&T and Verizon (e.g., no new customers or spectrum in the deal), nor does it counter the improved spectrum position of a T-Mobile/MetroPCS combo. At least not yet. What it does do is give Sprint a bit more financial breathing room to nail what’s left of its Network Vision- and iPhone-fueled turnaround strategy, as well as the financial wherewithal (courtesy of a well-heeled, aggressive, acquisitive global partner) to play an even more active role in future industry M&A. It would be better-positioned to jump into the MetroPCS fray today, consider buying up Leap Wireless tomorrow or even lay the groundwork to do a No. 3/No. 4 consolidation deal with T-Mobile down the line. Unless Sprint wants to spend its days battling with T-Mobile for AT&T and Verizon’s mobile scraps, a Softbank deal is likely only the first domino it needs to knock over."

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