Sprint is considering a potential merging bid with rival telecom carrier T-Mobile.
"People familiar with the matter" told The Wall Street Journal that Sprint "is studying regulatory concerns and could launch a bid in the first half of next year." They add that the bid price will depend on the size of the T-Mobile stake that the former plans to buy, but an initial price of $20 billion is disclosed.
The report says further that the the said merger plan is potentially testing out the reaction of antitrust officials, and "a bad reaction could put an end to the effort."
In 2011, the US Department of Justice shot down AT&T's plan to buy T-Mobile for $39 billion, saying that "the market needed four major national carriers to remain competitive."
But executives of both Sprint and T-Mobile agree that the government should allow a combination of two companies to level the playing field of the telecom industry. This is considering that market leaders Verizon Wireless and AT&T have more than two-thirds of the mobile subscribers across the United States, which T-Mobile chief financial officer Braxton Carter describes as a "duopoly."
Various sources, however, notes that even with a combined subscriber base, Sprint and T-Mobile would still be way behind Verizon and AT&T. Sprint and T-Mobile has 53 million combined subscribers, AT&T has 110 million, while Verizon has 120 million.
A Washington Post article poses four factors in considering the viability of the Sprint-T Mobile deal, the meat of which is the competition which will ultimately be beneficial to the consumers' end. It says that a market "with four viable, national companies is generally considered diverse and competitive enough to ensure consumers don't get screwed." The article cites the case of Canada which currently has three mobile carriers and is considering bringing in another player for the aforementioned reason.
In addition, the Justice Department has ruled in its 2011 decision regarding the proposed AT&T and T-Mobile merger that mergers of similar nature "would substantially lessen competition for mobile wireless telecommunications services across the United States," and that it may result in "higher prices, poorer quality services, fewer choices and fewer innovative products for the millions of American consumers."
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