Sprint to Acquire T-Mobile for USD$20 Billion To Fight Huawei Concerns

Sprint Corporation might be planning on acquiring rival wireless operator T-MobileUS.

If acquisition passes government regulatory approval, the US wireless telecom market will be dominated by three major wireless carriers. The merger between Sprint Nextel Corp and Softbank Corp earlier this year had also centered around avoiding the use of Huawei and ZTE hardware for their U.S. Network.

Sources point out that Sprint is currently studying whether the acquisition will pass any potential regulatory hurdles and if so, may announce the offer in the first half of 2014. The acquisition, which might reach a value of $20 billion, depending on how many T-Mobile shares Sprint will purchase, comes at a time when the US wireless market is experiencing an unusual period of consolidation. It was only a few months ago that Japan's Softbank acquired Sprint and T-Mobile merged with MetroPCS.

The acquisition, which will merge the third and fourth largest wireless carriers in the US, will make the two former opponents a strong competitor to Verizon Wireless and AT&T. However, because of fears that the loss of a fourth wireless operator will lead to lower service and higher prices for customers, the deal may encounter strong opposition from government regulators.

Sprint has not made a final decision whether or not it will go ahead with the takeover offer, preferring to wait and see what reaction regulators will have on the possibility of the takeover. If the reaction is overly negative, Sprint may abandon the offer.

The acquisition has been promoted by Softbank CEO Masayoshi Son who is known as an aggressive acquirer. Last July, he took an 80% controlling stake in Sprint. Sources say that the German wireless operator Deutsche Telecom, which has a 67% stake in T-MobileUS, is looking to exit the US wireless market and sell its stake in T-MobileUS. Last May, after its acquisition of MetroPCS, T-MobileUS was valued at $20 billion.

A combined Sprint, T-Mobile operator would have a total of 53 million US customers which would make it the third largest wireless operator in the country. Currently, Verizon is the largest wireless operator with 95 million subscribers. AT&T is second with about 75 million subscribers.

For years, both Sprint and T-Mobile US have struggled to keep and grow their subscriber base. Until recently, both have lost millions of customers to AT&T and Verizon. However, in the last two quarters, T-Mobile US, for the first time in four years, was able to increase its customer base.