There’s been past talk of a pairing between Sprint and Deutsche Telekom’s T-Mobile but nothing has happened. Many observers say such as transaction would be as disastrous as the Sprint-Nextel merger because Sprint runs a CDMA network while T-Mobile uses GSM.
However, after Citigroup raised Sprint’s ratings to Buy from Hold, there are many speculations about if Sprint should merge with T-Mobile USA to compete with AT&T and Verizon Wireless.
Michael Rollins, a Citigroup analyst, sees a 55% chance of a deal that combines Sprint and T-Mobile in 2010; he thinks the key would be to simply move Sprint’s customers to T-Mobile’s networks, and eliminate the multiple networks that Sprint operates.
Why Rollins upgrade Sprint’s Ratting ? First, he said, it looks as though Sprint will stem some of its subscriber losses over the next six months; the nation’s third-largest wireless operator has bled thousands of users for the past several quarters, the potential for the company to generate OIBDA (operating income before depreciation and amortization) above Street expectations and the possibility that it will consolidate operations with T-Mobile USA. Rollins thinks Sprint and T-Mobile USA will merge within the next year. The probability, he wrote in a client memo, “has risen to around 55 percent.”
Additionally : “While the integration would be highly complex, we believe a combination could substantially increase the company’s scale for spectrum, provide a combined path to 4G and LTE services through Clearwire [Sprint, of course, is the largest holder in Clearwire], increase subscriber scale for [T-Mobile's] 3G network and provide substantial cost savings,”
“At this stage the Sprint Buy call is about operational improvement primarily, and to the extent that it relates to possible future consolidation, we are dealing in probabilities only,” Sinclair writes. He maintains a Buy rating on DT.