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No AT&T (T) Deal Might Mean 'Auf Wiedersehen' for T-Mobile (S) (VZ) (GOOG)

September 6, 2011 10:58 AM EDT
As the old phrase goes: "a rose by any other name would smell as sweet." However, a less used but equally influential phrase goes: "a T-Mobile without an AT&T might smell like trouble."

Okay, so the second phrase was just made up, but reports Tuesday morning suggest T-Mobile is needing a merger with AT&T (NYSE: T) as much as AT&T wants to takeover T-Mobile. Anything else for T-Mobile might spell the end.

CNN says ever since the announcement, T-Mobile has been sitting idle, while it's profits, revenue, and market share continue to ebb as it hasn't made a move to introduce any new products or services.

Deutsche Telekom has been looking to leave the U.S. mobile business to focus on it's European operations for about a year now, meaning resources dedicated to growing T-Mobile's business have also been shrinking.

While AT&T and the U.S. Department of Justice, which filed a complaint last week looking to block the deal, should have a lengthy battle, most major M&A lawsuits tend to go through. Should it be another year or so, with T-Mobile not making product intros or investments in upgrading its network, the door might slam on T-Mobile as customers look elsewhere for service.

However, Sprint (NYSE: S) was also anticipating a possible acquisition of T-Mobile. Though AT&T might fail the "smell test," smaller Sprint may not have as many antitrust issues. As noted in an article last Thursday, "Should the AT&T deal fail, some speculate that Sprint will be quick to move in and attempt to grab T-Mobile from Deutsche Telekom. But with Sprint being in a distant third, and seeing cash burn through the last several quarters, it may need to structure a deal with equity rather than cash. Sprint had 52 million wireless subs at the end of the second-quarter, and combined with T-Mobile's 33.6 million, would still leave Sprint in the third position as largest wireless carrier in the U.S., but closer to AT&T and Verizon (NYSE: VZ) than it is now. AT&T last reported 98.6 million subs, while Verizon reported 106.3 million subs."

CNN also pegs Google (Nasdaq: GOOG) as a potential candidate. But with the recent move to acquire Motorola Mobility (NYSE: MMI), getting past antitrust issues at this point might be a challenge. Some speculate Google might want to become a carrier itself one day.

Cable and Internet providers like Dish Networks (Nasdaq: DISH), Comcast (Nasdaq: CMCSA), Windstream (NYSE: WIN), and CenturyLink (NYSE: CTL) have also been mentioned. Dish already plans to roll-out a 4G network to compete more wholly with LightSquared, while CenturyLink used to be a wireless provider.

CNN argues it would basically be a pain-in-the-butt for either Sprint or the cable providers to buy and integrate T-Mobile - not to mention costly as well. With an initial bid of $39 billion, it would take many of the companies years to amortize the cost with no guaranteed benefit, while investing the same amount of capital into expansion would possibly add more benefit.

AT&T is 1.6 percent lower Tuesday, while Sprint is down nearly 5 percent.


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