Sprint Plans to Battle Proposed AT&T/T-Mobile Merger

What Verizon basically said is that it will not make a difference as they believe in the end the deal will be approved. This will end up similar to what VZW has done with Altell However, I don't think Sprint is playing it right either, as they thought they were going to be the buyers while T Mobile was also shopping around with others. Sprint probably thought that T Mobile will not court AT&T at all as the deal would be too much trouble for AT&T and in the end they got the shaft which in turn got them mad and did not like the loss. I am sure that this is how it is going to get played out when Sprint goes on the offensive. One strike going against Sprint is the way it handled the take over of Nextel and this would also be a factor as to why authorities will not take them as seriously as they should have been. We all in the end, they will approve it because there will be a lot of concessions made by AT&T and I would also think that AT&T might have to accept a heavy clause for competitive purposes which probably freeze price increases for a period of time. Sprint needs to look at Metro to go the distance and that is where I think they should be doing instead of fighting.

 

VZW is not fighting the deal because they stand to gain a lot. If AT&T were able to acquire all of T-Mobile's customers, its not an insurmountable lead. More likely (and VZW had experience with this), AT&T will have to make concessions in a number of places and VZW will benefit--It's not out of the question to think VZW could acquire millions of customers out of the deal--and I think VZW has the money to fund those acquisitions piecemeal.

Further, T-Mobile customers aren't on T-Mobile because AT&T/VZW weren't available. They chose them for value. They'll all be grandfathered for now, but I think as a group, they change plans and handsets fairly often--which would force them onto AT&T plans at some point. With up to a year to make plans, I expect a large exodus from T-Mobile, which would really hurt if the deal falls through altogether (hence the $3 billion failure fee). Sprint could grab a lot of these customers, as could MetroPCS and Cricket. Any customers who see AT&T as the bad guy, might go to VZW despite the cost. I think further into the buyout, we'll see incentives on VZW and Sprint for those customers.

VZW sees this as a large opportunity for organic growth, especially with their aggressive LTE rollout. Sprint won't be an acquisition target for a while due to the current poor state of their spectrum organization. If VZW wants to acquire Sprint, they'll wait to see if Sprint starts performing poorly. AT&T will be too large to make another acquisition, so there won't be any competition to keep the price up against VZW. If Sprint manages to do well (and get through their spectrum reorganization and start a long term plan), then that provides "competition" in the market and opens VZW up to making other acquisitions like USCC or other smaller entities. AT&T's size could also spur a change in VZW's market strategy and make MetroPCS/Cricket an acquisition opportunity to create a separate low-cost "wing".

I also think Sprint is upset they were not able to acquire T-Mobile. They were probably under the impression that AT&T would not pursue due to regulatory issues, and mistakenly underbid . Despite the added spectrum chaos, a SprinT-Mobile merger was the last real shot at crossing the threshold to join the big two. I'm not sure how USCC business is playing out, but I assume Sprint will be interested this time next year.

The best summary I've read about this mess is that there are only two beneficiaries to the merger: AT&T and DT. This is a loss for everyone else, including the customers.

 

Sprint is in no shape to make acquisitions, that's why they failed to make a deal with DT. So they shouldn't be complaining now. They should've bought T-Mobile instead of Nextel and they would be in much better shape now. Nextel was the only beneficiary from the Sprint/Nextel merger, but a Sprint/T-Mobile merger would've benefited both.

 

I'll have to find the source again, but there was word the rumors of a SprinT-Mobile merger were true. They were in talks, Sprint had made a proposal, and were caught off-guard when it was leaked that AT&T would be acquiring T-Mobile. Obviously DT was willing and interested in maintaining ownership of a combined company, so Sprint could have managed a merger without being in shape to make acquisitions.

 

True. Also it was said that T mobile was also in discussions with others. I think it was 4. No one knew who was talking with who and based on what was said, the AT&T discussions have been going for over 3 months. Sprints management did the wrong thought by not thinking that if t mobile is talking to them that mean they could also be talkin to others. Their assumptions have always been the worst asset that since inception they have not been able to shrug it off. Sprint used to be one of my accounts during my banking days (from the start up of the company) and I always saw that an it carried from one management team to the other. I blame the financial
Section for not being broad minded and being very one way. This will haunt then for a long time unless they change tier attitude of nothing is above them.

Mozilla/5.0 (iPhone; U; CPU iPhone OS 4_1 like Mac OS X; en-us) AppleWebKit/532.9 (KHTML, like Gecko) Version/4.0.5 Mobile/8B117 Safari/6531.22.7

 

I don't think Sprint ever seriously thought they were going to buy or merge with T-Mobile. A more likely scenario was going to be a T-Mobile/Clearwire partnership of some sort. I'm happy to see Sprint is going to protest the AT&T/T-Mobile deal because less competition is never good for us consumers and this new AT&T would just be too big. I also think the Verizon/Alltel deal should not have been approved either and this AT&T deal will be a lot worse. If they allow AT&T/T-Mobile then they will also have to allow Verizon/Sprint.

 

LOL< I do not think that Sprint is doing it for us (They are also the same as any other company "The Bottom Line"). If they did they would have listened to the millions before loosing them as customers but instead ignored all. Now to this issue, Sprint's barks are going no where and the best they can do is to forget and look at another company and do it fast because that would be easier to be approved by government and they could use the AT&T purchase as a cause and would end up getting approval before AT&T.

 

It is only a matter of time. T Mobile has been ready for a sale for a long time, DT never really put too much money into T mobile and just wanted to get the highest return. They wanted it to be self sufficient but before they needed to strengthen it with higher capital investments. Now Sprint did all with Nextel but filed at implantation and they need to fix the finances big time. My thought is that they either get sold or stay independent or end up failing big time and if/when this happens we would be in the same situation.

Keep in Mind that neither VZW or AT&T gave a damn about T Mobile or Sprint lower offerings and if they were to match they would have only made the 2 bleed more as they would have had o lower their plans again to stay desirable and that would have been disastrous for them. The only good outlook was the cable companies buying them but that died big time. What should have happened, was a Sprint/Alltel/T Mobile merger and we really would have gotten the best results for the consumer side But that is gone thanks to Alltel being sold to VZW.

To be honest, one has to take his/her personal feelings about it and look at the business side and the survival aspect of the business. DT had the obligation to get the highest return for its shareholders and they sure did that.

 

An interesting article written by bloomberg:

Sprint Cheaper Than 99% of S&P 500 as Below-Book Signals Merger: Real M&A - Bloomberg



Sprint Cheaper Than 99% of S&P 500 as Below-Book Signals Merger: Real M&A
By Amy Thomson and Rita Nazareth - Mar 23, 2011 9:33 PM ET

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Sprint gained 0.5 percent yesterday, leaving it valued at 0.92 times net assets, data compiled by Bloomberg show. Photographer: Ramin Talaie/Bloomberg

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March 22 (Bloomberg) -- Jennifer Fritzsche, an analyst at Wells Fargo & Co., discusses the outlook for Sprint Nextel Corp. amid AT&T Inc.'s bid for Deutsche Telekom AG's T-Mobile USA unit for $39 billion. Fritzsche, speaking from Chicago with Erik Schatzker on Bloomberg Television's "InsideTrack," also talks about expectations for Clearwire Corp. and Leap Wireless International Inc. (Source: Bloomberg)

Sprint Nextel Corp. (S)’s shares are so battered after AT&T Inc. (T)’s $39 billion offer for T-Mobile USA that investors are valuing the third-largest U.S. mobile phone carrier at a discount to its net assets.

Sprint’s 11 percent slide to $4.49 since the T-Mobile USA deal was announced March 20 has left its stock trading below the company’s $4.87 a share in assets minus liabilities. That means investors can now buy Sprint for 92 cents on the dollar, cheaper than 99 percent of companies in the Standard & Poor’s 500 Index excluding financials, according to data compiled by Bloomberg. Sprint’s licenses from the U.S. Federal Communications Commission, which give it the right to operate its network in specific regions, alone are worth $19.9 billion, 46 percent more than its market capitalization of $13.6 billion, the data show.

AT&T’s purchase of T-Mobile USA from Deutsche Telekom AG (DTE) will give the combined company more than double the customers of Sprint, while Verizon Wireless has almost twice the market share. To boost value, Overland Park, Kansas-based Sprint may buy the remaining stake in partner Clearwire Corp. (CLWR) or another carrier such as MetroPCS Communications Inc. (PCS), according to Dan Hays, a director at consultancy PRTM. It may also become a target for Verizon as carriers that run on the same network technology are forced to combine, he said.

“Someone, whether it’s Sprint or Verizon, is going to have to serve as a catalyst for the consolidation,” said Washington- based Hays, who specializes in telecommunications. “What’s clear is that they can’t all afford to remain independent.”

T-Mobile Talks

Cristi Allen, a spokeswoman for Sprint, declined to comment on potential acquisitions. Marquett Smith, a spokesman for Verizon Wireless, declined to comment, as did Clearwire’s Susan Johnston and Jim Mathias of Richardson, Texas-based MetroPCS.

Sprint had held discussions with Bonn-based Deutsche Telekom about buying T-Mobile USA prior to the AT&T announcement, people with knowledge of the matter said this month. Talks had been on and off, and the companies disagreed on the value of T-Mobile USA, the people said. Sprint’s shares had surged 19 percent this year before the AT&T deal was announced.

With the purchase of T-Mobile USA, AT&T will surpass Verizon as the largest U.S. wireless carrier, in a deal the company said may take a year to close. Dallas-based AT&T anticipates having to divest some network assets and subscribers as a condition for regulatory approval, a person with knowledge of the situation said this week.

‘Odd Man Out’

Chief Executive Officer Dan Hesse, 57, said Sprint plans to submit its concerns over AT&T’s proposed acquisition of T-Mobile USA to Congress because the combination hurts the wireless industry and will have “tremendous” power.

“They got stood up at the altar,” said Kevin Smithen, a New York-based analyst at Macquarie Group Ltd., who rates Sprint “underperform.” “Without that transaction, we believe that Sprint is the odd man out.”

Sprint gained 0.5 percent yesterday, leaving it valued at 0.92 times net assets, data compiled by Bloomberg show. That’s cheaper than all the other 420 non-financial stocks in the S&P 500 except for three utilities: Princeton, New Jersey-based NRG Energy Inc. (NRG); Constellation Energy Group Inc. in Baltimore; and St. Louis-based Ameren Corp. (AEE)

The price-to-sales ratio of 0.41 for Sprint is also the cheapest among 50 companies in the MSCI World Telecommunication Services Index, according to data compiled by Bloomberg.

Sprint’s shares traded as low as 0.18 times book value in November 2008, two months after New York-based Lehman Brothers Holdings Inc.’s collapse deepened the worst financial crisis since the Great Depression, the data show.

‘Destroying Value’

“It’s a reflection of their weak performance for a number of years,” said Kevin Shacknofsky, who helps manage $7 billion in Purchase, New York, for Alpine Mutual Funds. “When you trade below book, it means that you think management is destroying value. They are not getting returns on investments they are putting in the network in building the business.”

Sprint listed net assets of $14.5 billion at the end of 2010, according to a filing with the U.S. Securities and Exchange Commission. Total assets amounted to $51.65 billion, while it had $37.11 billion in liabilities.

Property, plants and equipment were valued at $15.2 billion, after depreciation costs, and intangible assets were $22.7 billion, mostly made up of $19.9 billion in FCC licenses.

AT&T’s absorption of T-Mobile USA and its 34 million customers will leave Sprint further behind with 16 percent of the U.S. wireless market. The new AT&T will have 39 percent and Verizon Wireless has 31 percent, according to data from research firms EMarketer Inc. and ComScore Inc.

‘Clearly Looking’

Sprint will likely consider buying other companies that use the same network technology, known as CDMA, said Michael Nelson, a New York-based analyst at Mizuho Securities USA Inc. The standard is shared by Verizon Wireless, MetroPCS, Leap Wireless International Inc. (LEAP) and U.S. Cellular Corp. of Chicago. AT&T and T-Mobile USA are on the GSM standard, used more worldwide.

“They were in the bidding for T-Mobile. Therefore, they are clearly looking for acquisition candidates to help them grow their capacity,” said Peter Jankovskis, who helps manage about $2.7 billion at Oakbrook Investments in Lisle, Illinois. “They are further behind the curve than their competitors are. So, they are facing higher costs to upgrade and keep pace.”

Sprint may consider acquiring MetroPCS, which has a market value of $5.5 billion, and Leap Wireless, a $1.2 billion company, said Nelson, who recommends buying Sprint shares. Purchasing both would still leave Sprint with less than 21 percent of the wireless market, the data from EMarketer and ComScore show.

Clearwire Stake

Greg Lund, a spokesman for San Diego-based Leap Wireless, declined to comment.

Sprint may also buy the 46 percent of Kirkland, Washington- based Clearwire that it doesn’t already own, said PRTM’s Hays and Macquarie’s Smithen. The cost to buy the stake, meet Clearwire’s funding needs for its construction and update the network to a more commonly used technology standard may reach $4.5 billion, Smithen said.

Sprint had $20.2 billion in debt at the end of last year, while cash and near cash items totaled $5.17 billion, data compiled by Bloomberg show.

The wireless carrier is currently rated B1H, four levels below investment grade, according to Bloomberg’s Company Credit Ratings, which analyze borrowers based on indebtedness, market capitalization, profitability and other financial ratios.

Credit Ratings

If Sprint’s long-term debt were to climb by $6 billion in an acquisition, its credit ranking would drop one level to B1, Bloomberg’s ratings show. An increase of $4.5 billion, Smithen’s estimated price tag for Clearwire, would not change its rating.

Verizon may also consider acquiring Sprint to regain its title as the largest U.S. carrier, PRTM’s Hays said. Verizon Wireless is co-owned by New York-based Verizon Communications Inc. (VZ), which holds a 55 percent stake, and Vodafone Group Plc (VOD) of Newbury, England.

“In the past few years, Verizon has been satisfied to let Sprint hand over subscribers on its own,” Hays said. “If we’re now faced with a race to be the biggest, Verizon has to look at Sprint.”

Verizon Wireless Chief Executive Officer Dan Mead has said the company isn’t interested in buying Sprint, according to Verizon’s spokesman Smith.

‘Don’t Know How’

Sprint has lost money every year except one since acquiring Nextel Communications Inc. in 2005 for $45.9 billion including assumed debt. Customers abandoned the carrier after complaints about call quality as Sprint struggled to integrate the Nextel network into its operations. The company wrote down most of the acquisition, and the stock has retreated 81 percent since the deal was completed in August 2005, Bloomberg data show.

“We don’t own Sprint. There’s a reason we don’t own it,” said Michael Cuggino, who oversees more than $11 billion at Permanent Portfolio Funds in San Francisco. “AT&T and Verizon are taking the right steps to remain competitive and achieve growth, whereas Sprint appears to be falling behind. I don’t know how Sprint deals with that.”

Overall, there have been 5,243 deals announced globally this year, totaling $537.3 billion, a 22 percent increase from the $440.1 billion in the same period in 2010, according to data compiled by Bloomberg.