Should Sprint buy T-Mobile?
Analysts disagree on the benefits of such a combination, though it may be unavoidable if customers continue leaving the Sprint network
Computerworld - Sprint is expected to report a big loss of subscribers in its next earnings report, expected Feb. 11, further fueling speculation that No. 3 carrier Sprint has to merge with brash and bold "Un-Carrier" T-Mobile US.
Japan's SoftBank owns 80% of Sprint and is reportedly seeking ways to raise the cash needed to buy out Deutsche Telekom's 67% share of T-Mobile. The move comes as T-Mobile is gaining subscribers and Sprint is losing them, partly due to recent network disruptions.
On Jan. 8, T-Mobile announced it had added 869,000 net subscribers in advance of its fourth quarter 2013 earnings call, set for Feb. 25.
Meanwhile, analysts say that Sprint could report losing up to 500,000 subscribers in the fourth quarter of 2013. If it proves true, the number would be more than double the 243,000 subscriber losses Sprint reported for the final quarter of 2012.
"I expect Sprint to report a big subscriber loss, maybe around 400,000 to 500,000 for fourth quarter 2013, and a lot of those subs are going to T-Mobile," said Eric Costa, analyst at Technology & Business Research in an email to Computerworld.
In a recent note, Jefferies analyst Mike McCormack estimated Sprint will report losing 475,000 customers in the quarter. Kevin Smithen at Macquarie Securities estimated that Sprint will lose 360,000 customers.
The recent increases in T-Mobile subscribers and the losses predicted for Sprint are of the "postpaid" variety -- customers that pay monthly service fees after services are incurred. Prepaid plans have gained more popularity in the past two years as carriers offer lower cost smartphones and a variety of data plans when paid in advance.
Several analysts said a decision by Sprint to buy T-Mobile depends on a number of factors, including whether the deal can pass muster with regulators. Another big unknown is whether Dish Networks will attempt to buy T-Mobile to establish a bigger stake in fixed wireless services.
"I'd say it's looking likely that Sprint will try to buy T-Mobile, yet it will be a battle to get through regulation," Costa said.
Sprint's chances with regulators would be better than AT&T's in its failed effort to buy T-Mobile in 2011, partly because Sprint is smaller than AT&T and has performed poorly in recent quarters, he added.
Other analysts say that regulators at the Federal Communications Commission and Federal Trade Commission, may favor keeping T-Mobile as the No. 4 carrier, given its recent successes and the need to have four significant carriers in the U.S.
Sprint and T-Mobile wouldn't comment on speculation that a merger deal may be in the works.
The combined subscriber base of a merged Sprint-T-Mobile would be about 98 million, including 51 million postpaid. By comparison AT&T has about 110 million total subscribers, 73 million postpaid, and Verizon Wireless has 122 million total and 97 million postpaid, based on third quarter reports.
As of Oct. 31, Sprint had 54.9 million total subscribers, 30.9 million postpaid.
Bill Menezes, an analyst at Gartner, said he doesn't think it's advisable for Sprint to merge with T-Mobile.
"It's unclear that the continuing organizational disruption at Sprint from integrating another mega-merger would benefit the company in the long run or would benefit customers," he said in an email. "Sprint's already running behind in its turnaround and that's costing it customers."
Menezes said that Sprint customers, including large enterprise customers, are untrusting of Sprint because of network disruptions that hit during Sprint's expansive Network Vision upgrade, which included the addition of LTE wireless technology.
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