Friday, October 12, 2012

Sprint buying merged T-Mobile & MetroPCS?

Lately there has been rumors that Sprint is considering placing a bid for MetroPCS that would compete with the already announced merger between MetroPCS and T-Mobile. On top of that, rumors have circulated that Sprint may even consider making a bid for the merged entity of T-Mobile and MetroPCS.

I say, don't hold your breath.

I am skeptic to both these scenarios for differing reasons. When it comes to Sprint making a successful bid for MetroPCS, I think it is unlikely because of mainly two reasons. The first one is internal. Sprint management and the board have been unsuccessful over the past years to implement a successful strategy for the company and have had immense difficulty dealing with mergers in the past. The second reason is external but ties back into the first one. Why would any company want to merge with Sprint after the Nextel disaster and Sprints poor record over the past years? Sprint may very well bid for MetroPCS but I doubt they will be successful.

When it comes to the possibility that Sprint would launch a bid for the entire merged company T-Mobile and MetroPCS I find that even less likely to succeed partly because of the same reasons listed above but with one major added obstacle. 

The FCC and Department of Justice.

While I do think Sprint and T-Mobile/MetroPCS has less market power than a merged AT&T and T-Mobile would have had, I very much doubt that the government will allow any of the four national carriers to merge. Especially Sprint and T-Mobile. Because of the largely duopoly status of Verizon Wireless and AT&T, any competitive market pressure will have to come from Sprint or T-Mobile/MetroPCS in the future. If they are allowed to merge, the merged entity will very likely be completely happy humming along with Verizon Wireless and AT&T without having to try and compete on price or quality.

While approval for a merged Sprint and T-Mobile is not completely beyond the realm of possibility (like AT&T and T-Mobile always was), I think it is very unlikely to pass.

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