Sprint, T-Mobile Reportedly in Merger Talks

After seeing the gap between itself and the likes of AT&T and Verizon widen, speculation is growing that Deutsche Telekom will sell T-Mobile USA to Sprint Nextel.

In fact, the two companies have already held talks, Bloomberg reported, with DT wanting a significant stake up to 50 percent in the merged company if it were to sell. Sources tell the financial website that the DT and Sprint have had on-and-off” discussions about a merger, but so far theyve been unable to come to terms on how much T-Mobile USA is worth.

Sprint and T-Mobile are the third and fourth-largest wireless companies behind Verizon Wireless and AT&T, but its become apparent in recent years that without a huge shake-up in the market, the two might forever lag behind their bigger rivals. The iPhone is a big reason for the growing gap. AT&T has acknowledged it owes a tremendous amount of its growth to Apples darling, and now that Verizon Wireless has its hands on the device, it’s expected that even more subscribers will defect from Verizon’s competitors.

And while T-Mobile is flooding the airwaves touting the speed of its 4G network, it previously lost a number of subscribers when it fell behind its rivals in the 3G race.

So just how much would be a reasonable price for T-Mobile? An analyst with Evolution Securities in London says the carrier could be worth $15-20 billion, but that number could be higher if the carrier hadnt seen a drop in profit last quarter.

Todays news is the biggest of the M&A talk swirling about the two wireless giants in recent weeks. It was previously reported that T-Mobile might buy spectrum from Clearwire, something Bloombergs sources say would be a backup to a merger with Sprint. We also learned last month that LightSquared is in talks with Sprint about speeding up the development of its infrastructure at a lower cost.

According to their earnings reports, Sprints revenue topped $32 billion last year while T-Mobiles was a little over $21 billion.

Sprint stock climbed almost 5 percent Tuesday on the news, while DT was up nearly 4 percent.

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