Reports are circulating that Deutsche Telekom is considering a bid for struggling U.S. carrier Sprint Nextel. Over the weekend, German magazine Der Spiegel reported that managers at the parent company of T-Mobile were looking into a possible takeover or merger, but did not name any sources.
The Wall Street Journal, citing people familiar with the matter, also said that the German telekom was considering a tie-up; acquiring Sprint Nextel would make T-Mobile the largest U.S. wireless provider. The report said that deliberations were still at the beginning stages.
While arguments in favor of the merger include Sprint’s low share price and the immediate top of the market position the two could occupy after a merger, complications include different networks: T-Mobile is GSM-based and Sprint runs on CDMA, which could lead to costly integration. It is also unclear whether U.S. regulators would green light a merger between the third and fourth largest carriers.
For Deutsche Telekom, the move would be in line with its continued expansion in markets outside Europe. The United States has been a strong growth market for the telecom; T-Mobile USA added 3.6 million customers last year, with revenues up to $19.3 billion from $17.1 billion in 2006.
