And Then There Were Three: Sprint, T-Mobile in Merger Talks?

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Sprint and T-Mobile may be discussing the possibility of a merger wherein Deutsche Telekom-owned T-Mobile USA would be sold to Sprint “in exchange for a major stake in the combined entity, said people with knowledge of the matter,” reports Bloomberg.

The negotiations have apparently “been on and off, and a deal may not be reached,” according to Bloomberg’s sources. One of the sticking points may be T-Mobile’s overall value in the face of downward-sliding profits.

Sprint and T-Mobile are the third- and fourth-largest mobile operators in the U.S., respectively, behind Verizon and AT&T. While a representative from Sprint declined to comment on the story, Deutsche Telekom CFO Timotheus Hoettges told Bloomberg regarding T-Mobile, “In general, all options are open in the U.S.—the sale of the whole business or of parts.”

A merger of this size would certainly benefit Sprint and T-Mobile, as it’d give the combined entity the subscriber numbers and nationwide cellular coverage needed to compete more aggressively with Verizon and AT&T. It’d be interesting to see how a Sprint-T-Mobile 4G strategy would take form, as well.

Sprint currently has its WiMax network, but CEO Dan Hesse has indicated that the company may add the competing LTE standard in the future. Meanwhile, T-Mobile’s 4G HSPA+ network blankets 100 markets already and offers peak theoretical download speeds that eclipse WiMax.

Both companies operate on different base cellular standards, too: Sprint uses CDMA, T-Mobile uses GSM. So current handsets on each network wouldn’t be interoperable with the other, and a newly-joined entity would likely have to choose a single standard sooner or later. Until then, it stands to reason that the two brands would continue to operate distinctly as far as consumers are concerned.

The biggest question is whether or not a Spint and T-Mobile merger would be good for customers. In theory, overall coverage would be better and device selection would be better. But having only three big cellular providers in the market instead of four begs the question of whether these companies will compete more aggressively or less aggressively on monthly service fees, multi-year commitment agreements, and handset prices.

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