Two of America’s more downtrodden wireless carriers may be thinking about joining forces, despite the fact they speak different languages.
Bloomberg reported Tuesday that Deutsche Telekom (NYSE: DT), the parent company of T-Mobile USA, and Sprint (NYSE: S) are discussing a possible deal that would see Sprint take over T-Mobile with DT holding a big stake in the combined company. The report indicated the talks are preliminary, held up in part by the question of how to value T-Mobile, a subsidiary of the larger German carrier.
If true, such talks are also puzzling. T-Mobile and Sprint use different wireless technologies to power their networks and have also bet on different 4G technologies for expansion. They’re also the also-rans of the U.S. wireless market, trailing Verizon and AT&T (NYSE: T) in terms of both subscribers, brand identity, and collection of cool devices.
That means that they’d have to not only operate two networks in the short run, they’d have to make a painful decision about which 4G technology to dump. Neither is particularly far along in the 4G race (which is in its early stages for everyone) but each has invested significant resources in building and promoting their respective 4G strategies. T-Mobile focused the bulk of its CES press conference on its next-generation network technology, while Sprint has been one of the more prominent backers of the WiMax wireless technology favored by Intel (NSDQ: INTC) and Clearwire.
While it’s true that sometimes #3 plus #4 makes for a stronger overall company, Sprint’s track record of integrating acquisitions is not the best, given its struggle to make the huge $36 billion Nextel deal work. Deutsche Telekom didn’t exactly throw water on the rumor, however, telling Bloomberg that “all options are open in the U.S. — the sale of the whole business or of parts.”
Whatever happens, the ramifications of consolidation in the wireless carrier industry would have a huge effect on mobile technology development, as a stronger third option might give companies like Apple (NSDQ: AAPL) and Google (NSDQ: GOOG) another way to play carriers like Verizon and AT&T, while the carriers themselves might be emboldened to play hardball knowing the other options are limited.