Sprint Ends Talks to Acquire T-Mobile

Dish Network Could See the Collapse of the Deal as an Opening

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T-Mobile's disruptive marketing has helped make it a takeover target.
T-Mobile's disruptive marketing has helped make it a takeover target.

Sprint has ended talks to acquire T-Mobile as regulatory concerns outweighed the potential benefits of combining the third- and fourth-largest U.S. wireless carries.

Sprint has also named Marcelo Claure, the founder of mobile-phone distributor Brightstar Corp., as its new chief executive officer, according to a statement. Mr. Claure will replace Dan Hesse, who has led the company since 2007.

The decision by Sprint ends a nine-month effort by Japanese billionaire Masayoshi Son, whose SoftBank Corp. controls Sprint, to create a rival to Verizon Communications and AT&T Son had envisioned combining Sprint and T-Mobile to create a formidable competitor with the financial power and airwaves to serve more customers and eventually deliver faster broadband to consumers more cheaply than cable.

T-Mobile was willing to move forward on a deal with Sprint if it ceded on sticking points including over the financing structure, said people familiar with the talks, who asked not to be identified because the information is private. While both companies viewed approval for a deal as a long shot, given the current administration's stated goal of having four competitive wireless companies in the U.S., Sprint ultimately decided the regulatory environment was prohibitive, one person said.

"If Sprint can't buy T-Mobile it will be difficult for Sprint to do business," Yoshihiro Nakatani, a senior fund manager at Asahi Life Asset Management Co. based in Tokyo said by phone. "I'm concerned about Sprint's operations."

Scott Sloat, a spokesman for Sprint, declined to comment, as did Anne Marshall, a spokeswoman for T-Mobile. Matthew Nicholson, a Tokyo-based spokesman for SoftBank, declined to comment.

Without Sprint, T-Mobile's parent Deutsche Telekom AG will probably have to continue running the smaller U.S. wireless carrier as a standalone, a strategy likely to weigh on earnings. T-Mobile is also set to reject an alternative bid from France's Iliad SA, other people have said, meaning Deutsche Telekom will have to stay in a market where it was unable to establish a competitor capable of matching the clout of larger peers after a decade of effort.

Dish Network Corp. Chairman Charlie Ergen may see the collapse of the deal as an opening.

Charlie Ergen
Charlie Ergen

Mr. Ergen, who bid for Sprint last year and lost to SoftBank, said in May that he was willing to watch the Sprint pursuit of T-Mobile from the sidelines and wouldn't get in a bidding war. He did say then that T-Mobile was of strategic interest to Dish if there was an opening -- for instance, if SoftBank's bid were blocked by regulators.

"I wasn't a very good poker player, but when a bunch of drunken fools were throwing money around occasionally I was able to pick up the pot at the end of the day," Mr. Ergen said at the time. "My recommendation to our board would probably be let's see what happens."

Dish is planning to report quarterly earnings results today.

America Movil SAB, the Mexican telecommunications company that is studying how to break apart its wireless and landline phone operations, also could make a run at T-Mobile.

A representative for Dish and a press official for America Movil declined to comment on their possible interest in acquiring T-Mobile.

The collapse of the deal may leave Sprint in more of a bind than T-Mobile. While Sprint finally ended more than six years of losses with a $23 million profit in the fiscal first quarter, it still lost 245,000 contract subscribers. T-Mobile CEO John Legere has led the way on lowering prices to lure more customers, and last week raised its forecast for subscriber growth this year. T-Mobile added 908,000 monthly branded customers in the three months through June.

According to the Ad Age DataCenter, T-Mobile's total ad spend declined by 6.4% in 2013, to $1.07 billion. Sprint's spending climbed 11.1% to $1.56 billion.

-- Bloomberg News

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