Odds Rising that Sprint and T-Mobile Will Merge

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It still appears to be a long shot, but an industry analyst says the chances that Sprint and T-Mobile will merge are increasing. This would create a wireless carrier about the size of AT&T.

Citigroup’s Michael Rollins believes there is a 55% chance that these two companies will merge.

Why?
Sprint has been struggling in recent years, and is in third place, well behind Verizon and AT&T. T-Mobile hasn’t been losing customers at the rate Sprint has, but it’s not growing either, and is a distant fourth.

The theory behind this rumored deal is that two relatively small companies can be merged to make one that is better able to compete through sheer size.

Why Not
The argument against this merger is a technological one: they use incompatible wireless networking standards. T-Mobile uses GSM, while Sprint uses CDMA. Getting a merged company onto a single standard would take several years.

Sprint itself is an example of how this can go wrong. Several years ago it bought Nextel, which used yet a third incompatible networking standard iDEN. Many of Nextel’s customers didn’t become Sprint customers, but chose to switch providers instead.

And the problem isn’t expected to get easier. DT and T-Mobile USA are committed to moving to the 4G standard LTE, while Sprint has already begun the move to a different 4G standard, WiMAX.

Still, Rollins’ report was enough to push Sprint stock price up 6% yesterday.

Source: WSJ

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