Verizon, AT&T Wireless Dominance Doesn't Mean Sprint / T-Mobile Merger Any More Realistic

Includes: DTEGY, S, T, VOD, VZ
by: The Deal Economy

As long as Verizon Wireless (NYSE:VZ) (NASDAQ:VOD) and AT&T Inc. (NYSE:T) continue to expand their dominance of the mobile phone market, speculation about a merger of Sprint Nextel Corp. (NYSE:S) and Deutsche Telekom (DT) AG's T-Mobile USA will resonate.

Buzz about the creation of "Sprint Nextel T-Mobile USA" resurfaces every few months, and will probably continue to do so unless there is a strategic shift in the industry.

Walter Piecyk of Pali Capital Inc. isn't buying it.

"Never say never," Piecyk wrote in a blog Wednesday, "hence we assign a 2% chance that DT buys Sprint within the next two years."

Deutsche Telekom's management has disavowed interest in Sprint Nextel, he wrote, and the Obama administration's Federal Communications Commission would not sign off on a deal.

One banker suggests that Sprint Nextel's November decision to invest another $1 billion in Clearwire Corp. (CLWR) is an indication that it intends to remain independent. Clearwire deploys WiMax wireless broadband technology, while T-Mobile USA is leaning towards the LTE, or Long Term Evolution, platform.

The Clearwire investment could raise concerns about the amalgamation of wireless spectrum licenses among a common owner.

"The question is whether or not the FCC would attribute Clearwire's spectrum to Sprint and what impact would that have on the combined spectrum of the two companies," says Bingham McCutchen LLP telecom lawyer Andrew Lipman.

At some point, concern about the growing clout that Verizon and AT&T command may soften the government's views about a combination of the Nos. 3 and 4 wireless carriers. - Chris Nolter