Filed under: Deals, Industry, Competitive strategy, AT and T (T), Sprint Nextel Corp (S)
There are probably some hurdles to Deutsche Telekom (NYSE: DT), the German phone giant, buying Sprint (NYSE: S), but the deal does make sense for a number of reasons. Reuters writes that Der Spiegel, one of Germany’s most prominent publications, reported that “Deutsche Telekom is looking at a possible purchase of U.S. wireless company Sprint Nextel.”
DT has a very significant problem in the U.S., and it is one that the company cannot overcome on its own. The firm’s U.S. wireless venture, T-Mobile, runs a distant fourth among carriers in the U.S. The two leaders, AT&T (NYSE: T) and Verizon Wireless seem to have the top spots cemented and are adding new customers every quarter. Sprint is in third place with about 50 million subscribers to over 60 million served by each of the two leaders.
Sprint has deep troubles of its own. It has run into subscriber retention issues since the NexTel merger. The company’s financial position is weak. Its share price is under $8. Less than two years ago, it was nearly $23. Sprint’s plan to build a nationwide 4G network using WiMax is all but dead. The company simply does not have the financing to complete it.
T-Mobile has almost 28 million subscribers. Combined with Sprint, it would take the lead in U.S. wireless customers with about 78 million. Integrating the wireless platforms of the two companies would be extremely difficult. But, the substitute is being the fourth horse in a three-horse race.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.
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