Sprint (NYSE:S) is reportedly in talks to acquire T-Mobile, its smaller rival in the wireless carrier industry. The big idea is to generate more scale by combining the no. 3 and no. 4 players. Sprint has 50 million subscribers and T-Mobile has 34 million. Combined, that's 84 million, almost as big as rivals AT&T (NYSE:T) and Verizon (NYSE:VZ), which are above 90 million.
Scale matters for buying equipment, negotiating deals with suppliers, handset makers, sales, service, marketing, and basically everything involved in the wireless business. For instance, the combined company would have a much better opportunity to sell Apple's iPhone this way.
So even though there would be a mess integrating Sprint and T-Mobile's separate brands, customer bases, and wireless networks -- something that was a disaster for Sprint's last huge merger, with Nextel -- it could work out in the end. (It ultimately worked out for Cingular and AT&T Wireless, for example.) Of course, it could also be another disaster, giving Verizon and AT&T even more of a lead.
There was a time when the big rumor was that Comcast (NASDAQ:CMCSA) was going to buy either Sprint or T-Mobile, but that would be trickier now that Comcast is digesting NBC. And anyway, Comcast doesn't seem all that interested in wireless. It's not like it's doing much with its investment in Clearwire (CLWR), the 4G carrier.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.