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Sprint Will Let T-Mobile Take Reigns in Potential Merger

First Posted: Jun 16, 2014 01:54 PM EDT
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Photo : REUTERS/Rick Wilking

Sprint might not be Sprint in the near future, and if the company does want to keep its name, it might have to pay a pretty penny.

If Sprint merges with T-Mobile, it is expected to adopt the T-Mobile moniker, according to the latest reports from CNBC. Not only that, it looks like if the deal doesn't go through because of regulatory hurdles, Sprint will have to pony up a hefty $2 billion to T-Mobile. A previous Wall Street Journal report indicated AT&T had to pay T-Mobile parent company Deutsche Telekom AG $4 billion after failing to acquire T-Mobile in 2011, and Sprint might have to pay $1 billion. 

There are more indications that the T-Mobile brand will be the ultimate victor. Sprint CEO Dan Hesse has admitted he is okay with not leading the combined company, and reports indicated eccentric T-Mobile CEO John Legere and his management team will be the new leaders.

But it's been Sprint that's been pushing the merger, not T-Mobile. Sprint parent company SoftBank's chief executive Masayoshi Son has been touting the merger as a way to shake up the stale U.S. wireless industry. After the merger, the No. 3 and No. 4 wireless carriers could better compete with the juggernauts of AT&T and Verizon.

"I brought the network war and price war [to Japan]. I'd like to bring that to the States," Son said to industry officials in March. "I would like to provide an alternative to the oligopolistic situation that two-thirds of American households can only get access to one or two providers. I'd like to be a third alternative with 10 times the speed and lower price."

"If the government wants us to have a competitive environment, you are going to make sure that the duopoly doesn't use their prowess to crush the little guys and have this sub-1 GHz spectrum be moved all to them," T-Mobile CEO John Legere said in an interview on "Bloomberg West" earlier this year.

"We're all going to need better scale and capability. The question starts to be, 'How do you take the maverick and supercharge it?' We either need more spectrum and capability, a lot more investment, or we need consolidation."

The problem is U.S. regulatory officials haven't seen it the same way. Both the FCC and Department of Justice's antitrust division have said they are wary of further consolidation in the wireless market. Recent developments, however, could sway them the other way. Approval from both agencies is required for the deal to go through.

Sprint is expected to announce the $32 billion deal during the summer, offering around $40 for each T-Mobile share. 

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