US carrier Sprint is considering preparing a bid of more than $20 billion to buy T-Mobile US, according to The Wall Street Journal. T-Mobile shares surged 9 per cent in extended trading once the news hit, which cited unnamed sources familiar with the matter.
If the deal were to be approved by US regulators, which could prove to be a lengthy process, it would make for a US wireless market dominated by three companies. Sprint is reportedly studying the regulatory hurdles and could offer a bid for T-Mobile during the first half of 2014.
Sprint's attempt to make a deal comes after it was acquired by SoftBank Corp earlier this year. Similarly, T-Mobile has just completed a merger with smaller US carrier MetroPCS.
It's not clear if the deal would go through US regulators, as a merger of the third and fourth largest carrier in the US could create monopoly fears. In 2011, AT&T moved to purchase T-Mobile for $39 billion, only to be denied by the US Justice Department.
In September, T-Mobile CFO Braxton Carter wasn't opposed to the idea of a merger with Sprint, when speaking to Reuters.
"It's the logical ultimate combination," Carter said, about T-Mobile and Sprint together. Carter didn't come right out and say any talks between the two carriers had taken place, but his theorising about it was interesting.
T-Mobile has been working to make a new name for itself in the US market by offering unconventional "Uncarrier" smartphone plans so customers can upgrade whenever they want. Additionally, customers can pay for their smartphone as they go, instead of signing a two-year contract.
UK-carrier EE was formed in 2010 through the merger of T-Mobile and Orange. It appears something similar could happen in the US. A merger between T-Mobile and Sprint could create quite a messy situation for customers. T-Mobile runs on a GSM network and Sprint runs on a CDMA network, not to mention how much the two carriers' plans differ from each other.
A Sprint and T-Mobile combination would yield 53 million customers. It would still put the duo at a distant third behind Verizon Wireless, which has about 95 million postpaid subscribers, and AT&T, with about 72 million.