Mergers & acquisitions

Analyst: DoJ Suit Bad for All Carriers

While much of the rest of the industry is commending the Department of Justice for suing to block AT&T Inc. (NYSE: T)'s acquisition of T-Mobile US Inc. , at least one analyst believes that if the merger is blocked, it will be bad for all wireless operators, but especially the deal's biggest opponent, Sprint Corp. (NYSE: S). (See DoJ Blocks AT&T/T-Mobile Merger.)

And, he believes that although AT&T plans to contest the suit, the acquisition is "all but definitively dead."

The Justice Department's decision is clearly bad for AT&T and T-Mobile, but would appear to be the answer to Sprint's prayers. The carrier has already spoken out in support of the suit and seen its stock rise as a result. But, Sanford C. Bernstein & Co. Inc. analyst Craig Moffett says it just revives a solid competitor to Sprint and rules out the possibility of the CDMA carrier instead merging with T-Mobile, as was once rumored.

"Sprint now regains a competitor (T-Mobile) forced to re-energize its competitiveness in Sprint's core middle market," Moffett wrote in a research note Wednesday. "Sprint also potentially loses support of the Cable MSOs, who have been rumored partners for Sprint's 4G strategy but who now may have a better option in T-Mobile USA."

Moffett believes this will make it harder for Sprint to forge a deal with the cable industry to help fund its 4G network plans with or without Clearwire LLC (Nasdaq: CLWR). Sprint is set to detail its 4G "Network Vision" plans, potentially including how it would acquire more spectrum, at an Oct. 7 strategy meeting. (See Sprint's Strategy Meeting Isn't So Mysterious.)

Despite the pending merger, T-Mobile has continued to introduce new, competitive value service plans, although it has also continued to bleed subscribers. If the deal doesn't go through, it should put competitive pressure on Sprint for wireless subs, although arguably less pressure than a duopoly might have produced. (See US Wireless Operators' Q2 Scorecard and T-Mobile Shuns Overage Charges .)

Informa Telecoms & Media analyst Mike Roberts disagrees with Moffett, noting that the blocking of the merger will be good for Sprint and the smaller players, and that a deal between Sprint and T-Mobile may still be in the cards.

"A deal between T-Mobile USA and Sprint would face fewer regulatory hurdles given 2Q11 market share of 16% for Sprint and 10% for T-Mobile USA, but faces a host of other challenges including different technologies (Sprint with CDMA and T-Mobile USA with WCDMA/HSPA) and Sprint’s tailspin following its earlier deal with Nextel," Roberts wrote in a note.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

COMMENTS Add Comment
sam masud 12/5/2012 | 4:54:54 PM
re: Analyst: DoJ Suit Bad for All Carriers

By blocking the merger and keeping the market competitive, I don't see how Sprint loses--provided it plays its cards right.

sarahthomas1011 12/5/2012 | 4:54:53 PM
re: Analyst: DoJ Suit Bad for All Carriers

I'm leaning towards that view as well, but I do think it means there won't be a Sprint/T-Mobile tie-up nor will Verizon acquire Sprint. But I didn't think either of those scenarios were feasible in the first place.

FbytF 12/5/2012 | 4:54:53 PM
re: Analyst: DoJ Suit Bad for All Carriers

Wake up people, your listening to an analyst?  There's way too much at stake here and AT&T isn't just going to rollover and go away.  This is just the government recognizing an opportunity and taking advantage of it.  Write it down, this merger will happen, what's unknown is what it will cost AT&T to make the problem go away. Maybe they have to divest some other part of their business, they already tried the jobs angle, didn't work.  The only thing that's certain is the comment that the "merger is deinitively all but dead" is completely wrong. 

comtech3 12/5/2012 | 4:54:52 PM
re: Analyst: DoJ Suit Bad for All Carriers

Which one of the Greek mythological God thou namest? For you to say that something will go through,more specific, the AT&T aquisition, is not only ludicrous, but borders on ignorance.Oviously you forgot who run things......the FCC and the Department of Justice.If they say no, the answer is NO.AT&T is wasting time with their silly lawsuite because there are more in favor of not seeing the deal go through than those who want it.

Now, if you want to play God, I will be the devil's advocate and challenge you to place a bet on this.I know I will win because you're just a mythical God and I'm the devil's advocate!

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