T-Mobile’s Demands Might Stop Sprint Merger In Its Tracks

By Craig Galbraith Comments
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**Editor's Note: Please click here for a recap of the biggest communications mergers in Q1 2014.**

Regulatory concerns are probably the biggest blockade to a potential merger of Sprint and T-Mobile, America’s third- and fourth-largest wireless operators, respectively. But there’s a new obstacle: T-Mobile and its’ parent company, Deutsche Telekom (DT), reportedly want a big cushion to fall on if the acquisition gets the kibosh.

DT, a two-thirds owner of T-Mobile USA, wants what’s being described as a “breakup fee" of more than $1 billion, as well as promises that the T-Mo brand and some its high-ranking executives get to stay with the company, “people familiar with the matter" told The Wall Street Journal.

Regulators have hinted that they are nervous about reducing the number of major U.S. wireless carriers from four (Verizon, AT&T, Sprint and T-Mobile) to three. Some of T-Mobile’s demands – which the WSJ sources said are the source of continued negotiations between the carriers – are being made in part due to those concerns. Rules regarding the companies’ spectrum holdings reportedly are also a topic of conversation between Sprint and T-Mobile.

The carriers would like to make a deal soon, the sources said, but if they perceive regulatory opposition to be too much of a challenge, they might wait until after next year’s spectrum auction or even until 2017 when there’s a new presidential administration in place.

T-Mobile has greatly improved its acquisition position in the past year after rolling out its “uncarrier" initiative last spring. The Bellevue, Washington-based company signed up 1.3 million new customers last quarter – more than AT&T and Verizon Wireless combined. Its stock has risen nearly 70 percent in the past 12 months.

Follow senior online managing editor @Craig_Galbraith on Twitter.

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