According to Bloomberg, Sprint is deciding whether to make a counteroffer for MetroPCS that would top the German phone company’s bid to merge it with T-Mobile.
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The Kansas-based company made plans earlier this year to buy MetroPCS in February, but the board rejected the $8 billion bid as too expensive. Sprint also considered purchasing T-Mobile from Deutsche Telekom prior to AT&T’s (NYSE:T) $39 billion offer in March 2011. However, U.S. regulators forced AT&T to abandon the deal.
On Wednesday, Deutsche Telekom announced plans to merge its T-Mobile division with MetroPCS, a move that would create a rival large enough to compete with market leader Verizon (NYSE:VZ), as well as with Sprint.
While Sprint Chief Executive Officer Dan Hesse has said his company will play a part in industry consolidation, according to Bloomberg, the combination of MetroPCS and T-Mobile will limit Sprint’s options. As Sanford C. Bernstein analyst Robin Bienenstock said in a note to investors, Sprint would be so disadvantaged by the combination of the two carriers, it would have to make an offer.
However one issue could hinder Sprint’s offer: the breakup fee. Chief of Deutsche Telekom’s United States unit said that if T-Mobile backs out of the deal the company would owe MetroPCS $250 million and the reverse breakup fee would be $150 million.
But if Sprint does decide to offer a counterbid, Deutsche Telekom is prepared to offer MetroPCS better terms. The deal is the company’s latest attempt to revive the fortunes of T-Mobile, which is currently the fourth-largest U.S. mobile-carrier. Whil the combined entity would only have 42.5 million subscribers, less than Sprint’s 56 million, the merger could potentially give the carrier more clout to demand popular devices like Apple’s (NASDAQ:AAPL) iPhone.
Sprint will decide as soon as next week whether it will make an offer.
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