Deutsche Telekom eyeing up Sprint Nextel?
06 May 2008
Deutsche Telekom eyeing up Sprint Nextel?
German carrier Deutsche Telekom may be planning to bid for struggling US operator Sprint Nextel, according to reports over the weekend.
German magazine Der Spiegel ran a piece on Deutsche Telekom's interest in the third largest mobile operator in the US, sparking fevered speculation among industry watchers about the pros and cons of such a move.
On the one side, analysts point out that because Deutsche Telekom's subsidiary, T-Mobile USA, runs a GSM network, there is little scope for synergy with Sprint Nextel's CDMA and iDEN networks.
Moreover, given that Sprint has found the going tough in achieving cost efficiencies through the merger of its CDMA business with Nextel's iDEN network, something that doesn't auger well for any proposed tie-up with T-Mobile USA.
But Jonathan Chaplin, an analyst with investment bank JP Morgan, doesn't believe technological differences between DT and Sprint need necessarily be a deal breaker. "DT can probably purchase Sprint at a low enough price where they do not need network synergies to justify a deal," Chaplin wrote in a research note. "DT could essentially run three networks [GSM, CDMA and iDEN] until it migrates to LTE as the single network technology."
Such a prospect, adds Chaplin, would not necessarily be a death knell for Sprint Nextel's nationwide WiMAX plans if, as widely expected, it spins out its WiMAX business unit to focus on its core mobile operations.
There could, however, be negative repercussions for Clearwire, argues Chaplin. "Sprint-DT negotiations could hamper a WiMAX deal with Clearwire and we expect the news to weigh on Clearwire shares [Monday]," writes Chaplin. "We believe that a WiMAX deal is very close, and Sprint can't afford to wait for DT to run through its analysis before moving forward. In addition, we believe separating out the WiMAX business makes sense even if Sprint combines with T-Mobile. If anything, a potential bid from DT could push others in the WiMAX process to move faster."
Following reports of the potential tie up between Sprint and DT over the weekend, Sprint's share price rose 10.5 per cent at the end yesterday's trading.
Clearwire's share price fell from $15.25 to below $14.75 before recovering to $15.17 by the end of the day.
To comment on any articles, please contact us at chatback@telecoms.com or have your say on our blog.
Bookmark this page
