What is it with wireless carriers and merger discussions on the eve of major trade shows? Nearly one year after AT&T shocked the wireless industry en route to CTIA with news of a deal to purchase T-Mobile, Sprint and MetroPCS nearly gave those headed over to Spain for Mobile World Congress something to talk about.
CNBC reported Friday that Sprint and MetroPCS were “hours away” from announcing an $8 billion merger agreement, but the deal was thwarted by Sprint’s board of directors. CEO Dan Hesse was said to have endorsed the deal, which would have seen MetroPCS owning about 30 percent of the combined company, but it would have been a challenge.
For one thing, MetroPCS and Sprint don’t operate in the same spectrum bands, according to The Verge. That means blending the two customer bases would have been quite difficult. On top of that, Sprint is already carrying substantial debt and won’t make money on its extremely expensive iPhone deal for several years, leaving the company with few options to generate cash.
Consolidation in some form seems inevitable in the wireless industry, as only AT&T and Verizon are posting consistent profits. But this deal was apparently too rich for Sprint’s directors, and their rejection might cause investors to wonder about Hesse’s future at the company. Details are sketchy at this point, but stay tuned for our Mobile World Congress coverage as more details emerge once everyone gets on Barcelona time.
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