Analyst: DoJ Suit Bad for All Carriers
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