Sprint has said it will fight AT&T's proposed acquisition of competitor T-Mobile. Should the deal go through, however, analysts say it could benefit Sprint.
Sprint has come out publically against
AT&T's
proposed $39 billion acquisition of T-Mobile.
Verizon Wireless is the nation's largest carrier, followed
by AT&T, Sprint and T-Mobile. If AT&T
gets regulatory clearance to purchase the
number-four player, it "would reverse nearly three decades of actions by
the U.S. government and the courts that modernized and opened U.S.
communications markets to competition," Sprint argued in a March 28
statement. "The wireless industry has sparked unprecedented levels of
competition, innovation, job creation and investment for the American economy,
all of which could be undone by this transaction."
If the Department of Justice and the Federal Communications
Commission
were
to approve the deal - a process that analysts estimate could take up to a year - it could create a carrier almost three times Sprint's
size, in terms of wireless revenue. The consequence of this, Sprint says, would be a wireless industry
dominated by two companies with "unprecedented control over the
U.S. wireless post-paid market, as well as the availability and price
of key inputs, such as backhaul and access needed by
other wireless companies to compete."
"Sprint urges the United States government to block this
anti-competitive acquisition," Vonya McCann, Sprint's senior vice president of government affairs,
said in the statement. "This transaction will harm consumers and harm
competition at a time when this country can least afford it."
Not everyone believes Sprint will fare so poorly, should the
deal be approved.
Citadel Securities analyst Shing Yin, in a March 28 research
note, reiterated his position that AT&T, at the insistence of federal
regulators, is likely prepared to agree to significant divestitures - selling
off portions of T-Mobile, instead of keeping it all for itself - in order to
make the deal happen.
It's unlikely that Verizon would
be qualified to bid on the divested assets, Yin
wrote. If AT&T swallowing portions of T-Mobile is problematic, then
the larger Verizon doing the same is even more so.
"In our view, Sprint would likely be the biggest
eligible bidder for divested T-Mobile
assets, and we believe Sprint may be able to buy these assets at a meaningful
discount," Yin wrote. "We believe smaller
carriers may have an opportunity to purchase certain T-Mobile assets as well."
The assets would also come to Sprint at a bargain price.
According to Citadel, AT&T's $39 billion
bid values each T-Mobile subscriber it would inherit at $1,156. Were it divest
40 percent of T-Mobile at a 25 percent discount, it bumps the per-subscriber
rate AT&T would actually be paying to $1,349. Were Sprint to buy a portion,
it would be for far less.
"We believe any markets AT&T
is required to divest would likely be sold at a discount," states the
note. "For reference, in the 2009 Verizon/Alltel transaction, Verizon
divested 2.3 [million] subscribers at roughly half the valuation that it paid
for the rest of Alltel."
Metro PCS, the nation's fifth-largest carrier, could potentially also be interested. It declined, however, a request for comment.
Yin added in his note, "We believe
Verizon and Sprint would both benefit from the removal of a major competitor in
the market, while Sprint should additionally benefit from potentially picking
up significant parts of T-Mobile
divested by AT&T."
Nonetheless, Sprint's McCann said in the statement, on
behalf of customers, the industry and the country, "Sprint will fight this
attempt by AT&T to undo the progress of the past 25 years and create a new
Ma Bell duopoly."
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