WSJ: Deutsche Telekom mulls Sprint Nextel buyout
Sources have told the Wall Street Journal that Deutsche Telekom is looking into either a merger or buyout of the third-largest US wireless provider.
With the addition of Sprint's customer base, T-Mobile would become the largest cellular provider in the US, serving nearly 83 million customers. The news appears to be a repackaging of earlier rumors that first surfaced in March.
At that time, investment bank Merrill Lynch first suggested that the company may be forced to merge with Sprint after the company rolled out new unlimited voice and data plans.
The company said the move could trigger a price war, which in turn could end up hurting T-Mobile financially. The US arm prides itself in providing its customers with plans with the most value, and these new plans from Sprint threaten that.
Expanding its international presence may make sense for the company. In 2007, for the first time it generated more revenue outside of its home country of Germany, and that is expected to expand.
With domestic fixed-line revenues quickly falling, the company has looked outward to its successful international wireless business. This has included expanding T-Mobile USA -- consistently a strong performer -- through acquisitions and deals.
Also, now may be the best time for an acquisition to happen, due to the weak dollar. Analysts note that if such a deal were to take place, it would actually be cheaper and more affordable to Deutsche Telekom than the VoiceStream merger which brought it into the US wireless market.
There are also many issues that could hold up or even block any tie-in. First and foremost, the two companies combined use three different wireless technologies. T-Mobile employs GSM, while Sprint Nextel uses CDMA and iDEN.
Combining this network could be a daunting task, which DT may not have the money to complete.