Your Move, Verizon–Is There a Sprint Gambit?

When AT&T was adding hundreds of thousands of iPhone users a quarter, despite somewhat questionable network quality, Verizon Wireless did not sit back and watch idly.

Instead, it launched an aggressive advertising campaign, poking fun at its competitor’s network holes. Verizon gained significant notoriety by altering Apple’s well known marketing slogan to come up with “There’s a map for that.”

Now Verizon will have to make an even bolder move if it wants to keep AT&T from becoming the nation’s–and even the world’s–largest wireless carrier.

Most speculation is that Verizon wouldn’t be a candidate to buy Sprint because it wouldn’t pass regulatory muster.


But what if that was the plan?

If Verizon Wireless made a bid for Sprint, regulators would face a serious dilemma.

In fact, it could have the unintended–or, umm, intended–consequence of blocking AT&T’s $39 billion bid for T-Mobile USA.

“They cannot say no to one and approve the other, and they cannot approve both of them,” observes Chetan Sharma, who operates his own wireless consulting firm. “I would do that if I was playing the strategy card, and I would be surprised if they don’t do it.”

There’s no indication that Verizon Wireless is considering this strategy, and it would have to be willing to live with the consequences if the deal somehow were approved.

However, it might be an easy bluff since Verizon and Sprint have a number of synergies, including operating a network on the same CDMA technology. Additionally, there may be enough compelling reasons for Verizon Wireless to play hardball.

For instance, if AT&T and T-Mobile merge, the two will leapfrog Verizon Wireless to become the largest carrier in the country in terms of subscribers. Furthermore, AT&T and T-Mobile will become the world’s largest carrier in terms of revenues, and specifically data revenues.

At the end of last year, Verizon Wireless was the largest in the world in terms of data revenues, edging out NTT DoCoMo. AT&T was No. 3, and T-Mobile was No. 8, according to Sharma’s research.

Given that kind of scale, Sharma said: “There’s no way Verizon will be able to catch up with AT&T without an acquisition, or until a major shakedown happens in the industry, like a break-up. Verizon had good momentum because of its LTE rollout and recent device launches, but all a sudden momentum has shifted to AT&T and T-Mobile. They lose the luster of having the bragging rights of being the biggest operator in the country.”

Phillip Redman, a research VP at Gartner Research, agrees that a Verizon Wireless-Sprint merger would be nearly impossible to pass antitrust concerns if an AT&T and T-Mobile merger is approved, saying, “This is the last of the big mergers. Sprint will have to look outside to Comcast or Google to have a chance.”

Right now, Sprint’s looking like a bargain, too. The company’s stock is down nearly 14 percent today to value its market capitalization at $13 billion.

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