) possible takeover of the fourth largest U.S. telecom player -
T-Mobile US, Inc.
) - is the talk of the town. But Sprint's ambitious plan has
raised a few eyebrows in the U.S. telecom industry regulatory
body, forcing this powerful player to take a backward step in its
According to the
Wall Street Journal
, antitrust officials at the U.S. Department of Justice have
shown their contempt toward the T-Mobile and Sprint merger in a
meeting with Sprint Chairman Masayoshi Son, and CEO Daniel R.
An unfavourable reaction by the regulators cast a bad spell on
Sprint, as its share price dropped 2.4% to close at $8.65 on
Wednesday trade on Nasdaq.
After a failed acquisition attempt by
), this is the second attempt for T-Mobile to find a prospective
buyer. If the deal goes through, the U.S. telecom market will
most likely see radical changes in power play among behemoths
Verizon Communications Inc.
) and Sprint.
However, the question is whether the government will support
consolidation in a highly saturated U.S. telecom industry as this
would bring small players under the umbrella of big names or
secure competitiveness in the market that benefits the end
With respect to the Sprint/T-Mobile prospective merger,
regulators are apparently focusing more on maintaining a healthy
competitive spirit in the market. Reportedly, they have argued on
the negative impact that the deal could bring on market
competition and unanimously agree to four nationwide carriers to
balance out the industry. Notably, in 2011, the Federal
Communications Commission (FCC) had rejected AT&T's bid for
T-Mobile U.S., stating the same reason.
However, Sprint has reportedly argued that the top players
like AT&T and Verizon already control two-third of the
telecom industry and its chance of giving competitive support to
the industry remains low by standing solo.
For Sprint, the merger with T-Mobile U.S. will lead to over
100 million customers and place its parent company, SoftBank in a
much stronger position as opposed to major carriers such as
Verizon and AT&T. The new entity will also be the second
largest carrier in the world in terms of revenues, surpassing
). It will also give the Japanese carrier, Softbank a shot in the
arm, with a solid foothold in the world's largest economy.
However, skepticism on the part of regulators is the biggest
hurdle that Sprint needs to overcome in the coming days.
Softbank is still in negotiation with T-Mobile owner Deutsche
Telekom AG to resolve obstacles pertaining to this deal before
reaching a definitive agreement. An official review by the
antitrust department, which will decide the fate of Sprint and
T-Mobile, is also due. Until then, we expect the negative
sentiment caused by the recent opinion of antitrust officials to
continue surrounding Sprint and T-Mobile affect their market
Currently, Sprint and T-Mobile, both have a Zacks Rank #3
SPRINT CORP (S): Free Stock Analysis Report
AT&T INC (T): Free Stock Analysis Report
T-MOBILE US INC (TMUS): Free Stock Analysis
VODAFONE GP PLC (VOD): Free Stock Analysis
VERIZON COMM (VZ): Free Stock Analysis Report
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