T-Mobile And Sprint Merger: A Good Thing?

Deutsche Telekom, the parent company of T-Mobile, was reported last month to be debating whether or not to sell off the U.S. carrier from its portfolio. It appears now that Sprint is interested in the idea that would bring together the 3rd and 4th largest carriers in the U.S. Bloomberg reported that Deutsche Telekom would sell their T-Mobile USA unit to Sprint Nextel Corp. in exchange for a major stake in the combined entity.

T-Mobile and Sprint: Does it Make Sense?

The two companies are currently in debate over the valuation of T-Mobile. According to Michael Kovacocy, an analyst at Evolution Securities in London, it is worth $15 billion to $20 billion, and Sprint’s market value was $13.6 billion as of yesterday’s close. They would be selling from a low position in the current market and would likely receive less than $20 billion, far lower than the $25 billion they are asking.

The merger would allow DT to keep a large stake in the lucrative U.S. while also freeing up assets needed to assist in upgrading to a next-generation network.

T-Mobile And Sprint: On Different Networks

The move does make sense at this point, however, they would not be able to outright join on a network level. Sprint uses CDMA technology and currently is purchasing WiMax 4G capabilities from Clearwire, while T-Mobile uses GSM using an enhanced 3G in the form of HSPA+.

What do you guys think of the merger between Sprint and T-Mobile?  Will they complete a deal and will it allow them to better attack Verizon and AT&T?

Source: Bloomberg