Thoughts on T-Mobile USA, Sprint and AT&T

Sprint (S) has seen its stock price slide 34% in the past week and is currently down 65% based on its’ 52-week high. This slide has been continued as a result of the recent announcement that Sprint will convert to a LTE cellular network from the WiMAX network deployed by their partner Clearwire (CLWR).

Some are now predicting that Sprint will be forced to file for bankruptcy due to the increased debt load they will be required to carry.

This has consequences in other market segments, including on the AT&T (T) and T-Mobile USA (subsidary of DTE.DE) acquisition.  I have privately predicted that I believe AT&T will be on-the-hook for the $3 bln breakup fee for many months.  There are only a few global players that have the capital available to acquire Sprint. Sprint is a major player in the federal telecom space, consequently any of these would face blockage by the US Government as part of the Treasury Department CFIUS process.

With the current Verizon (VZ), Sprint, AT&T and T-Mobile players, the elimination of Sprint and T-Mobile as players is not something the Department of Justice will stand for in their antitrust case against AT&T.


With the pending credit downgrades of Sprint, I do not expect the pressure to decrease on them and the potential for an acquisition to be unlikely. The most likely situation I see is the T-Mobile acquisition to not be completed, Sprint to file for bankruptcy in the second half of 2012. The fate of T-Mobile USA is uncertain, perhaps Sprint can shift their commitments from Clearwire to T-Mobile, but adding a 3rd incompatible network (CDMA vs iDEN vs GSM/LTE) is going to be a major capital process regardless. Short of splitting the wireless and fixed network assets to promote value, I’m not sure anyone wants to pick up the disparate technologies and assets to continue an integration plan.

DISCLOSURE: Author owns none of the stocks mentioned in this article.

Comments are closed.