That was an exciting six months, wasn't it? News first broke that Sprint (S) wanted to acquire T-Mobile (TMUS 0.02%) back in December. At the time, the rumored deal could have been valued at over $20 billion.
But any potential tie-up between the No. 3 and No. 4 wireless carriers was always bound to face a steep uphill battle with regulators. Regulators blocked AT&T's attempt to scoop up T-Mobile in 2011, after all.
After months of consideration and speculation, it looks like Sprint is throwing in the towel.
Doomed from the get-go
Regulators have been uncharacteristically vocal in expressing concerns about the rumored deal, perhaps as a preemptive attempt to warn Sprint that such a merger would be doomed from the get-go. It's a tough sell to argue that an industry consolidating from four major players to three would benefit competition, but that's exactly what Softbank Chairman Masayoshi Son came to Washington to do lobby for this year, promising a "price war" if the deal was allowed to go through.
Reports had indicated that Sprint would have been on the hook for a breakup fee of $1 billion to $2 billion if the deal was officially proposed and subsequently blocked. T-Mobile certainly enjoyed the consolation fees it took home in the form of cash and spectrum after AT&T failed to acquire the company. That ended up enabling the disruptive carrier, and Sprint likely didn't want to risk it.
A SoftBank executive told Reuters that regulatory opposition was stronger than expected, but that a deal in the future remains a possibility if the regulatory environment changes. Sprint also replaced Dan Hesse as CEO. Marcelo Claure will become CEO and try his hand at a turnaround.
Shares of both domestic carriers fell on the news, with Sprint taking it hardest.
Surprise!
France's Iliad surprised investors with an unsolicited offer last week. Iliad offered $33 per share, hoping to grab a majority stake in the Un-carrier. That price tag was less than the $40 per share that Sprint was supposedly preparing to offer, but Iliad noted that its proposal would face less regulatory scrutiny (and therefore entail less risk) since the two companies do not operate in the same market.
T-Mobile majority owner Deutsche Telekom said, "Thanks, but no thanks." The $15 billion offer was too low, and Iliad would have had to stretch itself to come up with all the necessary funds anyway. That's especially true if a bidding war with Sprint had emerged.
Well, with Sprint officially bowing out of discussions, Iliad may now have an upper hand. Despite being rebuffed initially, The Wall Street Journal reports that Iliad is still planning to push forward. Iliad no longer has a competing suitor, which will afford it time and flexibility to consider its options carefully. For now, Iliad is standing pat with its $33 per share offer, but it could potentially sweeten the deal later on down the road.
It ain't over yet
That's not to say that a bidding war still can't emerge. DISH Network has been unsuccessfully trying to hook up with a wireless carrier for years. DISH continues to sit on billions of dollars worth of unused spectrum. Dish Chairman Charlie Ergen teased that Sprint pulling out "increased some optionality" for DISH. Ergen still wants to expand DISH's business, and it wouldn't be surprising if DISH ends up considering a T-Mobile offer in the foreseeable future.
For now, T-Mobile looks set to remain independent as it has turned down one offer and another has backed out. Everyone wants a piece of the Un-carrier thanks to the success of its aggressive tactics over the past 18 months.
