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Sprint calls off chase for T-Mobile; Hesse on way out

The hunt for T-Mobile US continues

US carrier Sprint is understood to have called off its courtship of T-Mobile USA and is preparing to go it alone. Only two months ago the widely expected deal was thought to be nearing completion, with those in the know putting the price tag for T-Mobile at around $31bn, creating an operator with the same scale as market leaders Verizon Wireless and AT&T. A combined Sprint-T-Mobile would have 103.53 million customers according to the latest figures from Informa’s WCIS Plus.

But a report by the Wall Street Journal on Wednesday said Sprint has been deterred by opposition from regulatory authorities and has called off its chase. The company is remaining quiet but it is also reported that CEO Dan Hesse will be replaced following a meeting of stockholders later Wednesday.

Hesse’s replacement is expected to be revealed as Marcelo Claure, a billionaire entrepreneur with no experience in the wireless sector. Just last week, Steven L. Elfman, President of Products and Services at Sprint said he would be retiring from his position in mid-August. His contract had originally run until January 2015 and he is a long time confidant of Hesse.

It might be that Softbank, which acquired Sprint last year, is looking to make a leadership change to try and turn the company’s fortunes around. Sprint has struggled with a wide scale network technology shift following its merger with Nextel and has been haemorrhaging subscribers for several quarters.

T-Mobile is not short of suitors either. Last week French telco Iliad put in a surprise bid for the operator. It’s worth noting however that Iliad’s offer is for just 56.6 per cent of T-Mobile USA at a price of $15bn, which is equivalent to $33 per share. Satellite television operator Dish Network has also made noises suggesting an interest in T-Mobile USA.

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T-Mobile parent Deutsche Telekom is likely to be very cautious after its previous failed merger with AT&T in 2011. That experience did have its own rewards however, after it walked away with $3bn in cash, substantial spectrum assets and a favourable roaming agreement.

Phil Kendall of industry analysts Strategy Analytics thinks this latest development could shake things up in the US. “The authorities seem determined to make consolidation within the top four near impossible, or at least unpalatable for those involved,” he told Telecoms.com.

“Deutsche Telekom and Softbank are obviously going to have to reconsider how they play in the market. For DT there is the option to cash out with Iliad, though for Softbank it now needs to make Sprint work on its own. It may aspire for more, but in the medium term it needs to prove to consumer that it is as good as AT&T and Verizon, and as affordable at T-Mobile.”

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