NEWS ANALYSIS: Sprint dumped its CEO on Aug. 6 and reportedly shelved plans to merge with T-Mobile two days after federal regulators expressed resistance to the carriers' plans to jointly bid on wireless spectrum.
Sprint on Aug. 6 quietly shelved its plans to buy most of competitor T-Mobile two days after an announcement by the Federal Communication Commission that it was opposed to the two companies
joining forces to bid on wireless spectrum in a 2015 auction.
While the FCC's position was a surprise to no one other than (apparently) Sprint, it served to drive home the fact that getting regulatory approval for the merger was a forlorn hope.
In addition to pulling the plug on the merger, Sprint's board also decided to get rid of the CEO who was theoretically behind the merger, Dan Hesse. Of course, the merger was Masayoshi Son's idea and was put into play once the acquisition of Sprint by Japan's SoftBank had been completed.
But with Sprint's endless struggles in the wireless market and the realization that it wouldn't be able to find a quick cure via a merger with T-Mobile, Sprint's board apparently decided to put an end to Hesse's troubled seven-year tenure as the wireless carrier's CEO.
Neither Sprint nor T-Mobile nor even T-Mobile's parent company Deutsche Telekom had ever officially acknowledged that a merger was under discussion. The same held true today as Sprint didn't issue a public statement that it was ending discussion of a possible merger with Sprint. However, multiple media reports on Aug. 6 citing unnamed sources said the deal was dead.
Son and SoftBank had pursued the T-Mobile merger for months
even after the FCC had discouraged the merger
in January. The FCC's position hasn't changed, which was made clear by FCC Chairman Tom Wheeler in reaction to the news that Sprint was dropping its bid for T-Mobile. "Four national wireless providers is good for American consumers. Sprint now has an opportunity to focus their efforts on robust competition," Wheeler said in a prepared statement.
Hesse was CEO of Sprint when some unfortunate events took place, not all of which were his responsibility. But they happened on his watch and customers began abandoning Sprint after repeated failures to implement 4G technology. Even now as the other major carriers in the U.S. are well along to fully implementing LTE nationwide, Sprint is still struggling to bring its Spark LTE online in all but a few metropolitan areas.
As a result, Sprint has been declining in the face of better-equipped competition. Worse, when faced with aggressive marketing by T-Mobile, Sprint customers are leaving in droves, which in turn means that T-Mobile is growing by 1 million subscribers per quarter.
T-Mobile is growing at the expense of not only Sprint, but it's also taking some subscribers away from AT&T and Verizon. But Sprint's subscriber loss is so bad that T-Mobile will pass Sprint as the No. 3 carrier sometime in 2015 if today's trends continue.
In fact, T-Mobile CEO John Legere thinks that milestone could be reached even sooner. "I’m going on record—
I predict we’ll overtake Sprint in total customers by the end of this year. Not some day. Not next year. This
year," Legere said Aug. 6 in a prepared statement . T-Mobile has just announced that the company has taken over the No. 1 position
in prepaid, beating out the other three major carriers.