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T-Mobile: Sprint's Next Billion-Dollar Buyout Target

We've seen merger mania as the main storyline for telecom giant Sprint (NYSE: S  ) during the last few years. Now, that same trend appears ready to envelop resurgent telecom antagonist T-Mobile (NYSE: TMUS  ) .

Last summer, Sprint acquired the remaining assets of its tumultuous partner, and at times anchor, Clearwire. This deal then paved the way for Japanese telecom heavyweight Softbank to acquire some 80% of Sprint's shares outstanding, giving Sprint the balance sheet support it needed to compete against U.S. telecom top dogs AT&T and Verizon Communications.

Source: T-Mobile

Sprint sets its sight on T-Mobile
In the latest chapter in Sprint's acquisition streak, news recently broke that Sprint is in the midst of laying the groundwork for a coming bid for T-Mobile. A linking up between Sprint and T-Mobile certainly makes sense on the surface. 

As the number three and four players in the U.S. telecom market, T-Mobile and Sprint combined could certainly enjoy the benefits and cost savings that would come with their combined scale. However, a Sprint and T-Mobile merger would also come with its fair share of risks, as history has taught us.

So, how should investors look at the unfolding Sprint and T-Mobile news?

In the video below, tech and telecom specialist Andrew Tonner discusses the Sprint and T-Mobile merger news, and why this deal appears to make sense for investors.

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  • Report this Comment On May 06, 2014, at 10:33 AM, Michael2014 wrote:

    I think people should be very wary of such a merger. T-Mobile is gaining marketshare and has an innovative program. Sprint is losing marketshare, and appears stagnate (or worse), but has spectrum. The big problem is that Sprint is the larger company. In such a merger, Sprint would most likely be in the driver's seat with disastrous consequences. I think a good analogy would be the Chrysler-Daimler merger. Chrysler had record profits, tens of billions in the bank, and was innovative (had the fastest concept to production time of any carmaker). Daimler was hemorrhaging money, had long and expensive developments, and had quality control issues. Because Daimler was bigger, however, they called the shots, bankrupted Chrysler, took their cash, and spit out the husk. T-Mobile doesn't have a vast stockpile of cash that Sprint could use to save itself.

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Andrew Tonner

Andrew Tonner is a tech specialist for The Motley Fool. He is a graduate of The University of Arizona with a degree in Finance.

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Related Tickers

8/28/2015 4:00 PM
S $5.19 Up +0.12 +2.37%
Sprint CAPS Rating: **
TMUS $40.00 Up +0.06 +0.15%
T-Mobile US CAPS Rating: ***