Updated Dec. 13, 2013 8:20 p.m. ET
Sprint Corp. S +3.44% Sprint Corp. U.S.: NYSE [SUP]$[/SUP]8.43 +0.28 +3.44% Dec. 13, 2013 4:05 pm Volume (Delayed 15m) : 14.01M AFTER HOURS [SUP]$[/SUP]8.69 +0.26 +3.08% Dec. 13, 2013 7:59 pm Volume (Delayed 15m): 5.43M P/E Ratio N/A Market Cap $32.05 Billion Dividend Yield N/A Rev. per Employee N/A 12/13/13 Sprint Working on a bid for T-... 12/13/13 Get Ready for the Cellular Big... 12/13/13 What A Sprint/T-Mobile Deal Mi... More quote details and news » S in
Your Value Your Change Short position is working toward a possible bid for rival T-Mobile US Inc., TMUS +8.65% T-Mobile US Inc. U.S.: NYSE [SUP]$[/SUP]27.64 +2.20 +8.65% Dec. 13, 2013 4:02 pm Volume (Delayed 15m) : 10.79M AFTER HOURS [SUP]$[/SUP]27.64 0.00 0.00% Dec. 13, 2013 7:59 pm Volume (Delayed 15m): 2.71M P/E Ratio N/A Market Cap $18.31 Billion Dividend Yield N/A Rev. per Employee N/A 12/13/13 Sprint Working on a bid for T-... 12/13/13 What A Sprint/T-Mobile Deal Mi... 12/13/13 Train Reading: It's a Market-P... More quote details and news » TMUS in Your Value Your Change Short position people familiar with the matter said, setting the stage for a giant telecom merger that if permitted by regulators would leave the U.S. wireless market dominated by three big companies.
Sprint is studying regulatory concerns and could launch a bid in the first half of next year, the people said. A deal could be worth more than $20 billion, depending on the size of any stake in T-Mobile that Sprint tries to buy.
A bid would cap a period of extraordinary consolidation in the U.S. wireless market, coming just months after SoftBank Corp. 9984.TO -0.67% SoftBank Corp. Japan: Tokyo [SUP]¥[/SUP]8900 -60 -0.67% Dec. 13, 2013 3:00 pm Volume : 22.38M P/E Ratio 19.44 Market Cap ¥10757.92 Billion Dividend Yield 0.45% Rev. per Employee ¥178,505,000 12/13/13 Sprint Working on a bid for T-... 11/28/13 Bloom Energy Brings AC/DC (Deb... 11/25/13 Dealpolitik: 2013 Gives Leadin... More quote details and news » 9984.TO in Your Value Your Change Short position acquired Sprint and T-Mobile merged with MetroPCS Communications Inc.
A merger of the third and fourth largest U.S. carriers would create a sizable competitor to industry leaders Verizon Wireless and AT&T Inc. T -0.12% AT&T Inc. U.S.: NYSE [SUP]$[/SUP]33.85 -0.04 -0.12% Dec. 13, 2013 4:00 pm Volume (Delayed 15m) : 24.58M AFTER HOURS [SUP]$[/SUP]33.84 -0.01 -0.03% Dec. 13, 2013 7:49 pm Volume (Delayed 15m): 285,868 P/E Ratio 23.84 Market Cap $178.53 Billion Dividend Yield 5.44% Rev. per Employee $531,527 12/13/13 Sprint Working on a bid for T-... 12/13/13 Get Ready for the Cellular Big... 12/12/13 Wireless Carriers to Help Cons... More quote details and news » T in Your Value Your Change Short position But it would likely face tough opposition from antitrust authorities, who worry consumers could suffer without a fourth national competitor to keep a check on prices.
Sprint hasn't decided whether to move ahead with a bid. Going forward despite regulators' concerns would be highly risky.
Any pursuit of a bid by Sprint could be aimed at testing antitrust officials' reaction to a deal, and a bad reaction could put an end to the effort.
It has only been two years since the Justice Department shot down AT&T's $39 billion deal to buy T-Mobile. The smaller carrier is wary of wasting more time on an ultimately fruitless merger, people familiar with its thinking said.
Driving the current effort is SoftBank Chief Executive Masayoshi Son, an aggressive acquirer who bought control of Sprint in July and now owns more than 80% of Sprint.
Deutsche Telekom AG DTE.XE -0.26% Deutsche Telekom AG Germany: Xetra [SUP]€[/SUP]11.36 -0.03 -0.26% Dec. 13, 2013 5:35 pm Volume : 7.21M P/E Ratio 19.92 Market Cap €50.68 Billion Dividend Yield N/A Rev. per Employee €257,630 12/13/13 Sprint Working on a bid for T-... 12/04/13 Microsoft, Pearson Create Corp... 11/21/13 Deutsche Telekom Sells 70% Sta... More quote details and news » DTE.XE in Your Value Your Change Short position owns about 67% of T-Mobile US and is looking to possibly exit the U.S. market, the people said. T-Mobile became publicly listed in May after merging with smaller rival MetroPCS, and now has a market capitalization of just over $20 billion.
[h=4]Decoding the Phone-Plan Puzzle[/h]Input your information to see which of the four biggest U.S. carriers might best fit your needs.
Select the image to go to the interactive.
Together, Sprint and T-Mobile would have nearly 53 million so-called postpaid subscribers—the industry's most creditworthy and lucrative customers.
That would still leave the combined company a distant third to Verizon Wireless, which has about 95 million postpaid subscribers, and AT&T, with about 72 million.
Executives from Sprint and T-Mobile have argued publicly that the government should allow a combination of the two companies, as it would give them the scale to make the network investments and spectrum purchases needed to compete against Verizon Wireless and AT&T. The market leaders have more than two thirds of the country's wireless subscribers and account for virtually all of the U.S. industry's profits.
Sprint and T-Mobile have struggled for years. Until recently, they shed millions of customers every year to AT&T and Verizon Wireless. T-Mobile added postpaid customers for the last two quarters, the company's first subscriber growth in more than four years.
In an effort to win customers, the two smaller carriers have pushed unlimited data plans and lower prices at a time when AT&T and Verizon Wireless have shifted to plans that get more expensive as subscribers use more data to watch video, play games or shop online.
T-Mobile has been the most aggressive with prices and new plans. For instance, the company was the first national carrier to offer plans that lower monthly prices when customers buy their phone outright or bring their own device. One of those plans costs smartphone subscribers $60 a month, compared with $80 a month for a similar plan on AT&T.
If Sprint buys T-Mobile, the next biggest traditional carrier would be U.S. Cellular, which offers service in 23 states and only has around 4.3 million postpaid customers. Bloomberg News
The government would likely be very wary of allowing T-Mobile to be acquired, former antitrust officials said. In its opposition to AT&T's deal to buy T-Mobile in 2011, the Justice Department called the smaller company an "aggressive competitor" that benefits consumers by spurring the other three carriers to provide more attractive prices.
The Justice Department doesn't appear to have changed its position. In April, it said in a letter filed with the Federal Communications Commission that having four carriers has created competition that is important to consumers. "It is essential to maintain vigilance against any lessening of the intensity of competitive forces," the Justice Department wrote.
FCC Chairman Tom Wheeler nodded to that view in a recent public appearance in Ohio.
"The mobile business is today, with four carriers, a competitive business, and it's important it stay that way," Mr. Wheeler said.
Both the Justice Department and the FCC declined to comment.
The midsection of the U.S. wireless business has been hollowed out by a wave of acquisitions in recent years. If Sprint buys T-Mobile, the next biggest traditional carrier would be U.S. Cellular, which offers service in 23 states and only has around 4.3 million postpaid customers.
TracFone Wireless Inc., owned by Mexico's America Movil, AMX.MX -1.24% America Movil S.A.B. de C.V. Series L Mexico [SUP]MXN[/SUP]14.39 -0.18 -1.24% Dec. 13, 2013 3:08 pm Volume : 80.79M P/E Ratio 14.54 Market Cap MXN1371.50 Billion Dividend Yield N/A Rev. per Employee MXN4,914,300 12/05/13 Mexico's America Movil, Televi... 11/11/13 Mexican Telecom Regulator Says... 10/29/13 Mexico's Telecom Regulator Det... More quote details and news » AMX.MX in Your Value Your Change Short position has about 23 million customers, but they are mostly lower-end prepaid subscribers, and the company doesn't have its own network. Instead, it rents space from the major carriers.
The Justice Department's willingness to allow the merger of AMR Corp.'s American Airlines with US Airways Group Inc. was read by some as a sign the government could be flexible on deals.
If Sprint moves ahead with a bid, it will also be betting that the government's main concern is preventing AT&T or Verizon Wireless from growing any bigger, and that authorities might allow a merger of the two smaller rivals even if they don't prefer that outcome.
T-Mobile and Sprint have been open about their interest in merging in the long term, and have long discussed the possibility. The question for the companies is whether to move forward now and risk rejection from regulators or wait in hopes political conditions grow more favorable down the road.
Acting now would let the companies sort out the merger issue before a crucial auction of spectrum expected to take place in 2015, the people familiar with the matter said. It would also allow them to take advantage of capital markets that are eager to fund big deals, the people said.
A deal would leave Sprint with the challenge of integrating yet another cellular technology into its network. Sprint is working on an upgrade that would make that task easier, but it is still a burdensome and expensive process that is far from complete.
Taking on the debt associated with a deal could also be a challenge. Sprint is already junk rated and has worked for years to get out under a heavy debt load. Moreover, both companies face expensive purchases of spectrum licenses in the years ahead.
If the two companies aren't able to merge now, it isn't clear when another opportunity might present itself. The risk for SoftBank is another suitor—like Charles Ergen's Dish Network Corp.—could make a move for T-Mobile. SoftBank already had to fend off Dish once before, when both companies vied for Sprint.
Mr. Son has plenty to do now in overseeing Sprint's expensive effort to overhaul its network. The work needs to be completed before the carrier can aggressively go after new customers.
—Dana Mattioli and Mayumi Negishi contributed to this article.
Write to Ryan Knutson at [email protected], Eyk Henning at [email protected] and Thomas Gryta at [email protected]
Sprint Corp. S +3.44% Sprint Corp. U.S.: NYSE [SUP]$[/SUP]8.43 +0.28 +3.44% Dec. 13, 2013 4:05 pm Volume (Delayed 15m) : 14.01M AFTER HOURS [SUP]$[/SUP]8.69 +0.26 +3.08% Dec. 13, 2013 7:59 pm Volume (Delayed 15m): 5.43M P/E Ratio N/A Market Cap $32.05 Billion Dividend Yield N/A Rev. per Employee N/A 12/13/13 Sprint Working on a bid for T-... 12/13/13 Get Ready for the Cellular Big... 12/13/13 What A Sprint/T-Mobile Deal Mi... More quote details and news » S in
Your Value Your Change Short position is working toward a possible bid for rival T-Mobile US Inc., TMUS +8.65% T-Mobile US Inc. U.S.: NYSE [SUP]$[/SUP]27.64 +2.20 +8.65% Dec. 13, 2013 4:02 pm Volume (Delayed 15m) : 10.79M AFTER HOURS [SUP]$[/SUP]27.64 0.00 0.00% Dec. 13, 2013 7:59 pm Volume (Delayed 15m): 2.71M P/E Ratio N/A Market Cap $18.31 Billion Dividend Yield N/A Rev. per Employee N/A 12/13/13 Sprint Working on a bid for T-... 12/13/13 What A Sprint/T-Mobile Deal Mi... 12/13/13 Train Reading: It's a Market-P... More quote details and news » TMUS in Your Value Your Change Short position people familiar with the matter said, setting the stage for a giant telecom merger that if permitted by regulators would leave the U.S. wireless market dominated by three big companies.
Sprint is studying regulatory concerns and could launch a bid in the first half of next year, the people said. A deal could be worth more than $20 billion, depending on the size of any stake in T-Mobile that Sprint tries to buy.
A bid would cap a period of extraordinary consolidation in the U.S. wireless market, coming just months after SoftBank Corp. 9984.TO -0.67% SoftBank Corp. Japan: Tokyo [SUP]¥[/SUP]8900 -60 -0.67% Dec. 13, 2013 3:00 pm Volume : 22.38M P/E Ratio 19.44 Market Cap ¥10757.92 Billion Dividend Yield 0.45% Rev. per Employee ¥178,505,000 12/13/13 Sprint Working on a bid for T-... 11/28/13 Bloom Energy Brings AC/DC (Deb... 11/25/13 Dealpolitik: 2013 Gives Leadin... More quote details and news » 9984.TO in
Your Value Your Change Short position acquired Sprint and T-Mobile merged with MetroPCS Communications Inc.A merger of the third and fourth largest U.S. carriers would create a sizable competitor to industry leaders Verizon Wireless and AT&T Inc. T -0.12% AT&T Inc. U.S.: NYSE [SUP]$[/SUP]33.85 -0.04 -0.12% Dec. 13, 2013 4:00 pm Volume (Delayed 15m) : 24.58M AFTER HOURS [SUP]$[/SUP]33.84 -0.01 -0.03% Dec. 13, 2013 7:49 pm Volume (Delayed 15m): 285,868 P/E Ratio 23.84 Market Cap $178.53 Billion Dividend Yield 5.44% Rev. per Employee $531,527 12/13/13 Sprint Working on a bid for T-... 12/13/13 Get Ready for the Cellular Big... 12/12/13 Wireless Carriers to Help Cons... More quote details and news » T in
Your Value Your Change Short position But it would likely face tough opposition from antitrust authorities, who worry consumers could suffer without a fourth national competitor to keep a check on prices.Sprint hasn't decided whether to move ahead with a bid. Going forward despite regulators' concerns would be highly risky.
Any pursuit of a bid by Sprint could be aimed at testing antitrust officials' reaction to a deal, and a bad reaction could put an end to the effort.
It has only been two years since the Justice Department shot down AT&T's $39 billion deal to buy T-Mobile. The smaller carrier is wary of wasting more time on an ultimately fruitless merger, people familiar with its thinking said.
Driving the current effort is SoftBank Chief Executive Masayoshi Son, an aggressive acquirer who bought control of Sprint in July and now owns more than 80% of Sprint.
Deutsche Telekom AG DTE.XE -0.26% Deutsche Telekom AG Germany: Xetra [SUP]€[/SUP]11.36 -0.03 -0.26% Dec. 13, 2013 5:35 pm Volume : 7.21M P/E Ratio 19.92 Market Cap €50.68 Billion Dividend Yield N/A Rev. per Employee €257,630 12/13/13 Sprint Working on a bid for T-... 12/04/13 Microsoft, Pearson Create Corp... 11/21/13 Deutsche Telekom Sells 70% Sta... More quote details and news » DTE.XE in
Your Value Your Change Short position owns about 67% of T-Mobile US and is looking to possibly exit the U.S. market, the people said. T-Mobile became publicly listed in May after merging with smaller rival MetroPCS, and now has a market capitalization of just over $20 billion.[h=4]Decoding the Phone-Plan Puzzle[/h]Input your information to see which of the four biggest U.S. carriers might best fit your needs.
Select the image to go to the interactive.
Together, Sprint and T-Mobile would have nearly 53 million so-called postpaid subscribers—the industry's most creditworthy and lucrative customers.
That would still leave the combined company a distant third to Verizon Wireless, which has about 95 million postpaid subscribers, and AT&T, with about 72 million.
Executives from Sprint and T-Mobile have argued publicly that the government should allow a combination of the two companies, as it would give them the scale to make the network investments and spectrum purchases needed to compete against Verizon Wireless and AT&T. The market leaders have more than two thirds of the country's wireless subscribers and account for virtually all of the U.S. industry's profits.
Sprint and T-Mobile have struggled for years. Until recently, they shed millions of customers every year to AT&T and Verizon Wireless. T-Mobile added postpaid customers for the last two quarters, the company's first subscriber growth in more than four years.
In an effort to win customers, the two smaller carriers have pushed unlimited data plans and lower prices at a time when AT&T and Verizon Wireless have shifted to plans that get more expensive as subscribers use more data to watch video, play games or shop online.
T-Mobile has been the most aggressive with prices and new plans. For instance, the company was the first national carrier to offer plans that lower monthly prices when customers buy their phone outright or bring their own device. One of those plans costs smartphone subscribers $60 a month, compared with $80 a month for a similar plan on AT&T.
If Sprint buys T-Mobile, the next biggest traditional carrier would be U.S. Cellular, which offers service in 23 states and only has around 4.3 million postpaid customers. Bloomberg News
The government would likely be very wary of allowing T-Mobile to be acquired, former antitrust officials said. In its opposition to AT&T's deal to buy T-Mobile in 2011, the Justice Department called the smaller company an "aggressive competitor" that benefits consumers by spurring the other three carriers to provide more attractive prices.
The Justice Department doesn't appear to have changed its position. In April, it said in a letter filed with the Federal Communications Commission that having four carriers has created competition that is important to consumers. "It is essential to maintain vigilance against any lessening of the intensity of competitive forces," the Justice Department wrote.
FCC Chairman Tom Wheeler nodded to that view in a recent public appearance in Ohio.
"The mobile business is today, with four carriers, a competitive business, and it's important it stay that way," Mr. Wheeler said.
Both the Justice Department and the FCC declined to comment.
The midsection of the U.S. wireless business has been hollowed out by a wave of acquisitions in recent years. If Sprint buys T-Mobile, the next biggest traditional carrier would be U.S. Cellular, which offers service in 23 states and only has around 4.3 million postpaid customers.
TracFone Wireless Inc., owned by Mexico's America Movil, AMX.MX -1.24% America Movil S.A.B. de C.V. Series L Mexico [SUP]MXN[/SUP]14.39 -0.18 -1.24% Dec. 13, 2013 3:08 pm Volume : 80.79M P/E Ratio 14.54 Market Cap MXN1371.50 Billion Dividend Yield N/A Rev. per Employee MXN4,914,300 12/05/13 Mexico's America Movil, Televi... 11/11/13 Mexican Telecom Regulator Says... 10/29/13 Mexico's Telecom Regulator Det... More quote details and news » AMX.MX in
Your Value Your Change Short position has about 23 million customers, but they are mostly lower-end prepaid subscribers, and the company doesn't have its own network. Instead, it rents space from the major carriers.The Justice Department's willingness to allow the merger of AMR Corp.'s American Airlines with US Airways Group Inc. was read by some as a sign the government could be flexible on deals.
If Sprint moves ahead with a bid, it will also be betting that the government's main concern is preventing AT&T or Verizon Wireless from growing any bigger, and that authorities might allow a merger of the two smaller rivals even if they don't prefer that outcome.
T-Mobile and Sprint have been open about their interest in merging in the long term, and have long discussed the possibility. The question for the companies is whether to move forward now and risk rejection from regulators or wait in hopes political conditions grow more favorable down the road.
Acting now would let the companies sort out the merger issue before a crucial auction of spectrum expected to take place in 2015, the people familiar with the matter said. It would also allow them to take advantage of capital markets that are eager to fund big deals, the people said.
A deal would leave Sprint with the challenge of integrating yet another cellular technology into its network. Sprint is working on an upgrade that would make that task easier, but it is still a burdensome and expensive process that is far from complete.
Taking on the debt associated with a deal could also be a challenge. Sprint is already junk rated and has worked for years to get out under a heavy debt load. Moreover, both companies face expensive purchases of spectrum licenses in the years ahead.
If the two companies aren't able to merge now, it isn't clear when another opportunity might present itself. The risk for SoftBank is another suitor—like Charles Ergen's Dish Network Corp.—could make a move for T-Mobile. SoftBank already had to fend off Dish once before, when both companies vied for Sprint.
Mr. Son has plenty to do now in overseeing Sprint's expensive effort to overhaul its network. The work needs to be completed before the carrier can aggressively go after new customers.
—Dana Mattioli and Mayumi Negishi contributed to this article.
Write to Ryan Knutson at [email protected], Eyk Henning at [email protected] and Thomas Gryta at [email protected]