Sprint considers bid for MetroPCS

05 October 2012 |


Sprint Nextel is reportedly considering a rival bid for MetroPCS following confirmation that the operator has agreed a merger with T-Mobile USA.

Reuters reports that Sprint, which is ranked third in the US wireless market, is debating whether to bid before the merger takes place or even to bid for the combined MetroPCS and T-Mobile, citing unnamed sources.

The carrier came close to bidding for MetroPCS in February for approximately $8 billion including debt, according to some reports.

This bid was withdrawn by Sprint’s board hours before announcement, the company having instead decided to save the sum for its LTE roll-out.

Sprint has been losing subscribers to both its larger and smaller ranked rivals in the US and would likely be considering a deal to gain more competitive muscle.

A combination of Sprint and MetroPCS would have synergy savings of $8 billion to $9 billion the source told Reuters. This is much higher than those expected in the merger between T-Mobile USA and MetroPCS of $6 to $7 billion.

Sprint revealed on Thursday that it was delaying the departure of its president of strategic planning, Keith Cowan, until January, suggesting that a deal could be on the cards. The company announced in August that Cowan would depart on September 30.
 
Some analysts suggest that Sprint is in a better position than T-Mobile due to the complicated structure of the reverse takeover agreement and that the carrier has the necessary capital to present a higher bid.

A key consideration for Sprint is likely to be whether regulators would oppose an acquisition of the combined T-Mobile and MetroPCS, given the impact that it would have on the competitive environment in the US.

Judging by market share figures from TeleGeography, a combination of Sprint, T-Mobile and MetroPCS would wield approximately 30% market share, just behind its first and second ranked rivals Verizon and AT&T with 33.8% and 32% share respectively.

Sprint’s board is reportedly due to meet today to discuss whether to go ahead with a bid, according to the Wall Street Journal.