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For months, Sprint has been rumored to be seeking a merger with T-Mobile so that the two struggling companies could join together and fight harder to compete with mobile powers Verizon Wireless and AT&T. But all of the talk has just been rumors, since neither company would comment publicly about any such alliance.
Now the rumors appear to be over, based on a new report from The Wall Street Journal on Aug. 5 that says that any such possible acquisition of T-Mobile by Sprint is now history. At the same time, Sprint announced on Aug. 6 that it is replacing its CEO, Dan Hesse, with Marcelo Claure, the founder and CEO of Brightstar, a subsidiary of SoftBank, which is also Sprint’s parent company.
Sprint’s decision to drop its rumored pursuit of T-Mobile came “in the face of stiff opposition from regulators,” according to the Journal, and was made at a Sprint board meeting on Aug. 5.
A Sprint spokeswoman told eWEEK in an email reply to an inquiry about the recent actions that “Sprint’s focus, moving forward under Claure’s leadership, is to make Sprint the most successful wireless carrier in the U.S.” She declined to answer specific questions about the rumored and apparently now-scuttled deal. “A Sprint-T-Mobile transaction has been speculated on by the media,” she wrote, “however Sprint has never announced any transaction or possible transaction between the two companies.”
Interestingly, however, Masayoshi Son, the CEO and chairman of SoftBank and the Sprint board chairman, appeared to allude to the dropped merger in a statement about the change in Sprint’s CEO. “While we continue to believe industry consolidation will enhance competitiveness and benefit customers, our focus moving forward will be on making Sprint the most successful carrier,” said Son.
Claure, 43, will begin his new job leading Sprint on Aug. 11, according to the company. He founded Brightstar, a wireless distributor that provides services to the wireless industry, in 1997.
Son, in a statement, called Claure “a successful entrepreneur who transformed a start-up into a global telecommunications company” at Brightstar. “He has the management experience, passion and drive to create the strongest network and offer the best products and services in the wireless industry,” said Son.
Meanwhile, even as the merger rumors have been swirling recently around Sprint and T-Mobile, another player, French telecom Iliad, has made its own bid to acquire T-Mobile, according to a recent eWEEK report. The Journal reported that “T-Mobile on Tuesday denied Iliad’s request for access to its books after determining that the proposed $15 billion bid wasn’t strong enough,” according to people familiar with the matter.
In response to an eWEEK request for comment on the situation, an Iliad spokeswoman replied via email that “at this stage, we do not comment or communicate about this subject.”
Hesse, Sprint’s out-going leader, has been the public face of the company in television, print and online ads since joining Sprint as president and CEO in December 2007, touting Sprint’s services, competitive prices and special service deals in a folksy, low-key manner.
In a July 2014 earnings call for the company, Hesse said adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.83 billion represented Sprint’s largest year-over-year growth on record, and its 12th consecutive quarter of meeting or exceeding Wall Street estimates. In addition, Sprint saw second-quarter income of $23 million, compared with a loss of $151 million the quarter before and a loss of $1.7 billion a year ago, it announced July 30.
Earlier this week, the Federal Communications Commission floated a new proposal to block telecoms from partnering together to go after available segments of wireless spectrum as they arise so that competition for the limited resource is kept more equitable. The proposal, which was launched by FCC Chairman Tom Wheeler on Aug. 1, would help keep larger telecoms from taking over more of the wireless spectrum at the expense of smaller players, according to an Aug. 1 blog post by Robert C. Sherman, the FCC’s wireless telecommunications bureau chief.
The FCC proposal would have likely hurt a potential Sprint, T-Mobile alliance, making the timing of the latest report particularly interesting. The issue surfaced at the FCC following the rumors about a potential merger of Sprint and T-Mobile, and the possibility that the two companies could even try to “partner up” for wireless spectrum before a merger is even completed.
Such a scenario would not have been appreciated by the FCC, wrote Sherman. “Our goal is to promote the participation of as many parties as possible in the auction. If two of the largest companies are able to bid as one combined entity in the auction, their combined resources may have the effect of suppressing meaningful competition. Therefore, the item tentatively concludes that joint bidding arrangements between nationwide providers should not be allowed. It also asks questions about such arrangements between providers of different sizes.”
The FCC wants to have the proposed ban on partnering in place before the next wireless spectrum auction would take place, he wrote.
The Sprint, T-Mobile merger rumors heated up in June with a report in The New York Times that a deal was pending for Sprint to buy its rival for $32 billion. None of the involved companies, including T-Mobile parent company Deutsche Telekom, ever confirmed or officially announced such a deal.