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T-Mobile sees a merger as inevitable and "not a question of if, it is question of when"

News by Andrew Kameka on Monday March 10, 2014.

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Sooner or later, the US arm of Deutsche Telekom, T-Mobile, will be sold off to a larger company. T-Mobile Chief Financial Officer Braxton Carter all but admitted as much when he said that it's just a matter of time before there is more consolidation in the wireless industry. Speaking at a telecom and media conference today, Carter said:

"It is not a question of if, it is a question of when...To take a third-scale national player that has the scale benefits with the right business model could be very competitively enhancing in the U.S."

One can easily connect the dots to Carter's statements as being indirect references to T-Mobile and Sprint eventually getting together. The two companies have for years been linked in merger reports but have yet to make it official. Masayoshi Son, owner of Sprint's parent company SoftBank, has been speaking with regulators in order to gain support for a deal. However, regulators have signaled that they would not embrace the nation's No. 3 carrier reducing competition by acquiring the No.4 carrier.

T-Mobile and Sprint will probably argue that they would be able to enhance competition as one company. T-Mobile has been able to spark significant change in the industry because of its Jump plans and low-cost service plans. With Sprint's backing, the two might be able to finance more efforts that could encourage further change. Helping their case is that the combined subscriber totals of Sprint (53.9 million) and T-Mobile (46.7 million) would only be 100 million. That would still leave the two companies behind AT&T (110 million) and Verizon (102.8 million), but put them in a much better position to compete for acquiring new spectrum and smaller carriers.

The FCC and Department of Justice will still see any consolidation as fewer choices being made available to the consumer, so Sprint and T-Mobile have a tough road ahead if this inevitable merger is to happen. Deutsche Telekom maintains that it's capable of running T-Mobile independently, but it did try to sell to AT&T before the deal was abandoned, and CEO Timotheus Höttges says he'll keep "an open mind" about other possible mergers.

source: Reuters

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Andrew Kameka
Andrew is based in Miami, Florida.

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