Sprint may want MetroPCS for itself.
Bloomberg reports that the number-three U.S. wireless carrier is considering its own offer for prepaid provider MetroPCS, which yesterday announced a deal with Deutsche Telekom to merge with the U.S. wireless provider T-Mobile.
The news service says that Sprint, which had been close to its own deal to buy MetroPCS earlier this year, is talking to advisers about whether it should offer a higher price to buy the company. Sprint had been re-evaluating a play for MetroPCS a few weeks ago before T-Mobile announced its deal, unnamed sources told Bloomberg.
On Wednesday, Deutsche Telekom, which owns U.S. wireless operator T-Mobile, announced a plan to buy MetroPCS and combine it with T-Mobile. The combined entity would be called T-Mobile and would be publicly traded. The move would give T-Mobile, the fourth largest national wireless carrier, additional spectrum in key urban markets throughout the U.S., such as New York and San Francisco. T-Mobile would use the additional spectrum to build the company's 4G LTE network.
The deal would make T-Mobile much more competitive with rivals AT&T, Verizon Wireless and Sprint. While the new T-Mobile would still be much smaller than the other three national carriers, the move would also eliminate a potential acquisition target for Sprint. Ever since the deal was announced, analysts have speculated about Sprint's next move. The wireless operator is also in need of additional spectrum to build its 4G LTE network. And MetroPCS was an attractive target given the company's aggressive move toward deploying its own LTE network.
Some experts have speculated that Sprint could consider purchasing Leap Wireless, another prepaid operator with a similar business to MetroPCS. But Leap Wireless's spectrum position is not as attractive as MetroPCS's and the company has not yet begun a 4G LTE build.
Sprint and Deutsche Telekom representatives declined to comment to Bloomberg on the possibility of a Sprint challenge.
There is a break-up fee associated with the T-Mobile/MetroPCS deal, according to Bloomberg. And that may hinder Sprint's chances of making an effective counter-offer. The news service reports that T-Mobile's CEO John Legere said that if T-Mobile backs out of the deal, the company would owe MetroPCS $250 million. And if MetroPCS backs out, the carrier would pay T-Mobile $150 million.
Bloomberg reports that Deutsche Telekom is prepared to increase its bid if a counter offer is made, citing an unnamed source.
Sprint was close to striking a deal with MetroPCS earlier this year, according to reports. But in the eleventh hour, the company's board of directors rejected the deal. Sprint is the in middle of a massive network upgrade that it calls Network Vision. And it's believed that the board of directors wants the company to focus on getting its business back in shape. In 2005, Sprint went through a disastrous merger with Nextel. The company lost millions of customers during the integration process, and it is still recovering from the damage done to its reputation.