) has abandoned its long-pending quest to take over rival T-Mobile
U.S. Inc. (
) over regulatory resistance. The Federal Communication
Commission's (FCC) attempt to prevent Sprint and T-Mobile from
jointly bidding in the upcoming spectrum auction was the last nail
in the coffin that has ended the months of negotiation between the
two carriers, at least for the time being.
The non-culmination of the deal will affect Sprint owner
SoftBank Corp.'s attempt to form a new force within the U.S.
telecom space that would be capable to take on runaway leaders
AT&T Inc. (
) and Verizon Communications Inc. (
). Sprint's stock nosedived more than 15% in after-hours trading on
Tuesday on the NYSE.
Softbank's hankering for the U.S. telecom sector is no secret.
In July 2013, the company had acquired a 78% stake in Sprint for
$21.6 billion after gaining shareholders' approval and clearing all
competition-related concerns expressed by the FCC.
Reportedly, Japanese telecom giant SoftBank was planning to buy
stake in excess of 50% in T-Mobile from Deutsche Telekom for around
$16 billion (1.7 trillion yen), thus valuing T-Mobile at around $32
billion. A successful amalgamation would have created a company
with more than 100 million customers besides rendering SoftBank a
solid foothold in the world's largest economy.
However, the deal faced closed scrutiny from both the FCC and
the U.S. Department of Justice (DOJ) in context of anti-competitive
issues. The regulator seeks a minimum of four national carriers
within the country as it will ensure sufficient choices for the
customers. Softbank, on the other hand, argued that the combined
entity would improve the quality of mobile services while also
reducing prices for customers.
Sprint's backing out from the bid does not come as a surprise as
initially in 2011, the FCC had rejected AT&T's bid for T-Mobile
U.S., stating that it wants at least four nationwide telecom
operators to remain competitive.
However, scrapping of the said deal now throws light on French
carrier Iliad SA's recent $15 billion bid for a 56.6% stake of
T-Mobile U.S. Although T-Mobile intends to turn down Iliad's bid,
the French carrier is currently negotiating with U.S. cable and
satellite companies to improve on its previous offer.
DISH Network Corp. (
) can come back into the fray, having earlier stated that it would
be interested in T-Mobile if Softbank's deal fell through. We
believe Iliad and DISH Network have a higher chance of getting the
FCC clearance as the number of telecom operators in the country
will remain at four even if either of the two deals is
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