$3bn bidders line up for Sprint brand as DoJ wants to create new fourth operator

Claure and Legere.jpg

The US government wants Sprint and T-Mobile US to carve out a new mobile company as part of the conditions for approval of their $26 billion merger.

According to reports, the Department of Justice (DoJ) wants them to spin off a new fourth company with its own infrastructure – a model very similar that that adopted in Italy when French company Iliad came into the market as a condition for approval of the merger of Veon’s Wind and CK Hutchison’s Tre (Three).

Bloomberg is reporting that “people with knowledge of the discussions, who asked not to be identified because the talks are private” say the DoJ wants there to be four carriers in the US mobile market. Sprint, controlled by SoftBank of Japan, and T-Mobile US, controlled by Deutsche Telekom of Germany, argue that a merger will create a strong third competitor in the market behind AT&T and Verizon.

The Federal Communications Commission (FCC) has already approved the merger, having won guarantees that the merged company, which will retain the name T-Mobile, will build a 5G network that would cover 97% of the US population within three years, including 85% of the rural population. And it would cover 99% of the US population within six years and 90% of the rural population.

Bloomberg reported that Marcelo Claure,executive chairman of Sprint, andJohn Legere, CEO of T-Mobile US, (pictured) had been seen outside the DoJ offices in Washington.

Sprint has already agreed to sell its Boost Mobile subsidiary, possibly with spectrum, before the merger with T-Mobile is complete. Reports from the US say bidders are prepared to pay $3 billion.

One of the potential bidders, named by Reuters this week, is Q Link Wireless. Its CEO, Issa Asad told Reuters that it is working with private equity partners to put together a bid of $1.8 billion to $3 billion.

Stephen Stokols, CEO of FreedomPop, another prepaid operator, told the agency that “an undisclosed private equity group he is speaking with have placed Boost’s future value at about $4 billion”, though that depends on a future share offer. Three years ago Russian investor LetterOne, which is a major shareholder in Veon, invested $50 million in Freedom Pop

Stokols, a former vice president of strategy and business development at BT, is not bidding himself, he told the agency. He set up FreedomPop in 2012 along with Niklas Zennström, one of the founders of Skype. According to its website, FreedomPop also offers service in Mexico, Spain and the UK.

Peter Adderton, who founded Boost Mobile in Australia and the US in 2000, might also be interested in bidding, though he is not yet putting a valuation on the company. According to LinkedIn, he is still involved with the Australian company but he sold the US operation to Nextel in 2005 – and Sprint later merged with Nextel.

The decision maker in the DoJ is Makan Delrahim, head of its antitrust operations. The attorney general, William Barr, would normally take the final decision but he recused himself in April as he is set to receive benefits worth up to $1.5 million thanks to shareholdings in AT&T.