MetroPCS Is Off the Table. What Now, Sprint?
With its acquisition of MetroPCS, T-Mobile and its parent, Deutsche Telekom, have taken out one tough rival and put the competitive screws to another: Sprint.
Earlier this year, Sprint was poised to acquire MetroPCS, but the company’s board of directors balked at the deal at the last minute. Though fully negotiated, the board opted to walk away, rather than sign. So Sprint forfeited its chance to claim MetroPCS’s spectrum and 9.3 million customers.
Why? That’s not entirely clear. Sprint’s stock was off, and had been for years. There may have been concerns about execution and, more broadly, the company’s overall strategy. Regardless of the reason, the end result was the same: Sprint lost out on a compelling opportunity. Had it snapped up MetroPCS, not only would it have gained that spectrum and the millions of customers I mentioned earlier, it would have significantly raised its profile in the wireless sector. Remember, MetroPCS customers were already roaming onto Sprint’s network, because it, too, uses the CDMA standard. Integration would have been relatively easy. Presumably, that’s why Sprint spent months negotiating to acquire MetroPCS.
So, now that MetroPCS is off the table, what’s Sprint’s next move? There are two potential tacks here. The first, as Forrester analyst Charles Golvin explains it, is simply to stay its current course.
“Sprint needs to stick to its knitting: Get Network Vision finished, put the iDEN network to bed, maintain the aggressive pace of their LTE buildout, ride herd on Clearwire’s TD-LTE deployment, and maintain the marketing focus on its differentiated unlimited offer,” Golvin told AllThingsD. “If they succeed in those efforts, they’ll maintain their significant lead on T-Mobile/MetroPCS — or whatever the new company will be called.”
Golvin’s overarching point: Sprint should focus on Verizon and AT&T as its competition, not T-Mobile.
But there’s one other potential move here: Take a run at T-Mobile and acquire it before it’s too late. And that’s what BTIG Research analyst Walter Piecyk is looking for. “At this point, it might make more sense for Sprint to consider purchasing T-Mobile USA,” Piecyk theorizes. “A T-Mobile deal would give the company much more scale and would materially increase the scarcity value of Sprint to Charlie Ergen’s Dish, which is looking for a wireless partner.”
An interesting theory. Clearly, Sprint would do well to stick to its knitting, as Golvin suggests. But in order to more aggressively compete with AT&T and Verizon, it might want to bulk up by taking out T-Mobile, as well.