Sprint ends courtship of T-Mobile US

August 6, 2014, 12:36 AM UTC
Sprint added mobile subscribers but still needs to slash its expenses.
Scott Olson—Getty Images

Sprint called off its courtship of T-Mobile US on Tuesday, ending hopes of creating a major challenger to wireless giants AT&T and Verizon.

The breakdown in acquisition talks, reported by the Wall Street Journal and other publications, ended months of negotiations between the two companies. But in the end, they could not reach agreement on financing and faced a tough fight getting approval from regulators, according to news reports.

Sprint CEO Dan Hesse is expected to step down as soon as Wednesday.

For Sprint, the collapse of negotiations are a huge loss makes for a much tougher slog to close the gap with its bigger rivals. Both Sprint and T-Mobile – the third and fourth largest U.S. carriers – have around 50 million subscribers each while AT&T and Verizon both have more than 100 million. By combining forces with T-Mobile US, Sprint had hoped to quickly gain scale and save money through streamlining.

Sprint, which is owned by Japanese telecommunications firm SoftBank, has long coveted T-Mobile US, which is mostly owned by Deutsche Telekom AG. Over the years, they have held on-again off-again talks, but never as serious as the latest round.

Even if they had reached agreement on the financial details, the companies would have likely faced skeptical regulators. The Obama administration has been clear that it prefers four major players in the wireless space and that further consolidation may harm competition.

Last week, Illiad, a French wireless upstart, made a surprise $15 billion bid for T-Mobile US. But the proposal didn’t generate much public interest from T-Mobile.

After the news about the failed negotiations, Sprint’s shares fell 15% in after-hours trading to $6.18 (S). T-Mobile’s shares fell 9% to $30.91 (TMUS).

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