T-Mobile's uncarrier strategy may thwart potential Sprint takeover

T-Mobile US' (NYSE:TMUS) aggressive pricing strategies--such as cheaper rate plans and the elimination of early termination fees--may serve as a roadblock to any potential takeover attempt by Sprint (NYSE:S).

According to a Bloomberg report, which queried various experts, T-Mobile's highly touted "uncarrier" program is disrupting the wireless market and helping create the type of competition regulators want in the wireless industry. And therefore, regulators will be less likely to approve any potential acquisition attempt by another U.S. operator such as Sprint.

As part of its uncarrier effort, T-Mobile has introduced no-contract rate plans, killed international data roaming, allowed customers to upgrade their devices up to two times per year, and reimbursed new customers for the early termination fees they incur when they switch to T-Mobile from another major U.S. operator. Since launching its uncarrier campaign, T-Mobile has reported millions of new customer additions; the carrier said it added around 1.645 million new subscribers in the fourth quarter.

Late last year, The Wall Street Journal reported that Sprint was considering a bid for T-Mobile that could be worth more than $20 billion, depending on how large a stake it wanted in the operator. The report said that Sprint was studying the potential regulatory issues that may result from this type of deal but that the company might make an offer for T-Mobile in the first half of this year.  

According to Bloomberg, citing people familiar with the matter, Masayoshi Son, CEO of SoftBank, the majority owner of Sprint, has held discussions with banks about financing a T-Mobile deal.  Sprint has declined to comment on the reports.

Last week at the 2014 Consumer Electronics Show in Las Vegas, T-Mobile CEO John Legere seemed to throw cold water on the idea of Sprint purchasing T-Mobile by insisting that the T-Mobile brand is going to be around for the long haul.

"I can tell you that the T-Mobile brand, attitude, and identity is here to stay," Legere said, according to The Verge. He added: "What we're doing, in any [acquisition] scenario, will prevail."

Any potential Sprint acquisition of T-Mobile would require approval from the Justice Department's antitrust division and the FCC. The Justice Department challenged AT&T's 2011 proposed $39 billion acquisition of T-Mobile because it said the transaction would reduce the number of national players from four to three and lead to higher prices for consumers.

For more:
- see this Bloomberg article

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