Sprint on Wednesday confirmed rumors that it has backed out of a proposed deal to merge with T-Mobile in order to create a third large wireless carrier that could compete more effectively with Verizon and AT&T Wireless. According to Sprint, which had allied with its corporate parent SoftBank, antitrust regulators had indicated that they would block the merger, so there was no point in proceeding.
This isn't the first time that federal regulators have squashed a merger involving T-Mobile, which is the smallest of the four largest wireless carriers in the United States. In 2011, the US Department of Justice and Federal Communications Commission both sued to block the blockbuster $39 billion deal, costing AT&T $4 billion in cancellation fees.
It appears that Sprint will not have to pay any cancellation fees to T-Mobile (or its corporate parents) because the two firms had never been able to agree on a "drop-dead date."
But while the Sprint/T-Mobile deal was valued at almost as much as the AT&T deal—$32 billion in this case—the stakes seemed less lofty. Had AT&T merged with T-Mobile a few years back, it would have created the nation's largest carrier by far, with Verizon on a second tier and Sprint alone at the bottom. But the Sprint/T-Mobile deal would have resulted in a market with three similarly-sized giants: AT&T, Verizon and Sprint/T-Mobile.
Despite this, federal regulators indicated to Sprint that they would block this merger because it would reduce choice in the wireless industry and raise prices for consumers. Indeed, it was the scuttling of the AT&T deal that led T-Mobile to adopt its "uncarrier" strategy and start chipping away at how carriers normally do business. The firm has moved so quickly that other carriers have basically been copying what T-Mobile does ever since.
From a technical perspective, the Sprint/T-Mobile merger might have proven difficult as well. Sprint's network utilizes CDMA technologies, while T-Mobile uses an incompatible GSM format. (AT&T and T-Mobile both use GSM, which could have made that merger more technically seamless.)
While the full fallout from this aborted deal is unclear, Sprint has made one major change already: It has replaced CEO Dan Hesse—who infamously proclaimed that the company would not survive without the T-Mobile merger—with Marcelo Claure. Mr. Claure is the founder and CEO of Brightstar, the world's largest mobile device distributor and a subsidiary of Sprint parent company SoftBank.
