Deutsche Telekom Reportedly Planning Sprint Buy

Rumors have resurfaced that Deutsche Telekom is interested in acquiring Sprint Nextel. According to a Sept. 13 story in London’s Daily Telegram, Deutsche Telekom, parent company of U.S. carrier T-Mobile, is preparing an offer worth more than $10 billion for Sprint, the No. 3 U.S. carrier behind AT&T and Verizon.
The story of a possible merger first appeared more than a year ago, but nothing materialized. Daunting challenges, including arranging financing and the difficulties of merging different systems with competing technologies, may also prevent the currently rumored merger. T-Mobile uses GSM while Sprint deploys CDMA (Code Division Multiple Access) and Nextel’s IDEN (Integrated Digital Enhanced Network) technologies. Sprint acquired Nextel in 2005 and has struggled to integrate the IDEN technology.
In addition, Sprint and T-Mobile are pursuing different paths to fourth-generation technology. Like AT&T and Verizon, T-Mobile is committed to LTE (Long Term Evolution) while Sprint is going with WiMax.
Deutsche Telekom CEO Rene Obermann reportedly sees a merger as a way to revitalize T-Mobile’s struggling operations in the United States and United Kingdom. Obermann blamed Deutsche Telekom’s first-quarter loss of $1.46 billion on T-Mobile’s sluggish performance. Deutsche Telekom squeaked out a second-quarter profit, but through cost-cutting and not subscriber gains.
In early afternoon trading, Sprint shares were up almost 13 percent to $4.26 thanks to the merger rumor.