There's serious change afoot in the wireless industry -- price wars and maybe even new merger deals.
Share prices jumped all over the regional and second-tier wireless service sector on Friday. Leading the charge, Clearwire (NASDAQ: CLWR) soared as much as 11.7%. Guggenheim analyst Shing Yin speculates that ultra-tight Clearwire partner Sprint Nextel (NYSE:S) might use cash from the pending merger with Japanese peer SoftBank to grow domestically.
Yin's primary Sprint target would be MetroPCS (NASDAQ:TMUS), which already has a deal in place to merge with T-Mobile USA. MetroPCS shares jumped as much as 5.6% as the potential bidding war started to sound doable. But the next logical step -- or an alternative one, in case MetroPCS isn't on the table -- would be to turn Sprint's major ownership of Clearwire into a fully consummated merger. Hence, Clearwire's even larger gain.
That idea also resonated across the industry. If Sprint starts meddling with T-Mobile's buyout plans, or just goes looking for additional spectrum licenses and customer lists on its own, other smallish operators would suddenly walk around with targets painted on their backs. Being the most obvious secondary target once T-Mobile and MetroPCS are out of the running, Leap Wireless International (NASDAQ: LEAP) gained 5.2% at most.
The SoftBank-Sprint deal is shaking up the American phone service sector even before it passes regulatory hurdles. Industry giants AT&T (NYSE:T) and Verizon (NYSE: VZ) must be shaking in their boots as the industry consolidates around and against them.