Sprint, T-Mobile Merger Rumors Are Nothing More Than a Trial Balloon

NEWS ANALYSIS: The vague news report that surfaced Dec. 13 that Sprint was considering buying T-Mobile is something called a "trial balloon." But the reality is that there's likely nothing here but the wizard behind the curtain.

Last week a set of rumors popped up in an occasionally reliable newspaper called The Wall Street Journal to the effect that Sprint was considering a purchase of its smaller rival, T-Mobile.

The newspaper didn't attribute the report to specific sources, but only stated that it was told by "people" that this could be true. I'll avoid a discussion about unattributed and unsourced stories other than to suggest that we might want to take this report with a grain of salt.

Here's what likely happened. Somebody at Softbank, which is the majority owner of Sprint and is the Japanese carrier run by billionaire Masayoshi Son, called a buddy who knows somebody at The Journal and said something to indicate that somebody at Softbank is thinking about adding T-Mobile to Softbank's stable.

There's no indication, either in the loosely sourced story at The Journal or elsewhere, that it went beyond this. Specifically, there's no indication that anyone has talked to T-Mobile or its majority owner Deutsche Telekom about such a plan.

The idea behind such a trial balloon is to see what the reaction by competitors, shareholders and the government might be if a merger such as this one were to be proposed and negotiations were to ensue. So far, the reception has been largely negative. It's hard to see what T-Mobile would gain from such a merger, and it's unlikely that T-Mobile's stockholders would benefit.

The most likely reason this was floated now is that there's a new chief at the Federal Communications Commission, and Softbank is testing the waters to see if the new FCC chairman, Thomas Wheeler, is any more likely to be open to a purchase of T-Mobile than his predecessor. Wheeler is, after all, on record as being in favor of the AT&T purchase of T-Mobile.

But as they say here in Washington, that was then, this is now. In those days Wheeler was a telecom lobbyist and whatever he said was at the behest of who he was lobbying for at the time. His actual beliefs now as the chairman of the FCC may or may not have any relevance.

The other reason for floating the idea of buying T-Mobile now has to do with Softbank's Son and his penchant for building his company through aggressive corporate acquisitions. Over the past 20 or so years, he's bought a number of technology-oriented companies, including the original owner of eWEEK's predecessor print publication PC Week, Ziff-Davis Publishing, in 1995 before selling the company off in pieces in 2001 in the midst of the dot-com bust.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...