WASHINGTON, August 5, 2014 – According to breaking wire reports, Sprint (S) has decided to give up its attempt to join with Deutsche Telekom-owned T-Mobile (TMUS), is abandoning its pursuit of the smaller wireless provider due to regulatory issues deemed likely to hamper or scuttle the arrangement.
News that the deal was likely off sent the stock in Sprint down some 1 percent in after-hours trading, while acquisition candidate T-Mobile plummeted some 6 percent. The price movements are likely to continue in the same direction in early trading Wednesday morning.
The likeliest major hurdle in the teaming of these two troubled companies is the current Administration’s rock-solid but not entirely rational insistence that there must be at least two competitors to mobile and landline giants AT&T (T) and Verizon (VZ). While that goal is theoretically admirable, neither S nor TMUS has the economic or technical chops to compete against AT&T or Verizon.
The Wall Street Journal also brought to light a surprise bid for TMUS by French wireless and landline carrier Iliad SA, something else that may have soured Sprint’s bidding move, although TMUS is said not to favor that move.
Regarding the competitive U.S. telecom landscape, despite the apparent desires of the current Administration in Washington, Sprint, which now benefits from the much-deeper pockets of its Japanese majority owner Softbank Corp., is still finding it difficult to compete with the two majors, although Softbank claims major improvements in the quality of Sprint’s U.S. network.
Fallout from the Sprint decision is not likely to improve the tone of August’s already shaky trading mood.