Verizon and AT&T are in a tight race for the top mobile carrier in the nation. FCC wouldn't mind this merger of #3 Sprint and #4 T-Mobile, but there is just too much problems to begin with. I follow Sprint Nextel more than I follow T-Mobile USA. However, it's just too risky for either company.
Sprint has a lot of long term promises on their plate. They are phasing out Nextel through 2013. They are a parent company in Clearwire, who operates their "4g" network, WiMAX. Even though Sprint pumps money into Clearwire's capital base, they are struggling with earnings. Then there is the issue of LTE. Masses want these 3 letters tagged to their 4g for some reason.
T-Mobile, who was up for bid last year, was bought by Deutcshe Telekom. Guess what? It was a bad investment (1). Like Sprint, T-Mobile has a high churn rate and short term consequences befell on DT.
Then there is technology conversion. It would make more sense for AT&T to either buy or merge with T-Mobile USA. The valuation of T-Mobile USA lower then what DT paid and AT&T has more leverage than Sprint. AT&T has HSPA and GSM just like T-Mobile. Sprint has CDMA and WiMAX. It would cost even more to consolidate technologies.
Therefore, this merge is just hype for stock volatility. It's too early for this to happen, especially with CTIA coming up. Give this a year, when T-Mobile's valuation decreases to half it's price.
1. Deutsche Telekom Losing $28 Billion Bet With T-Mobile: Real M&A - Bloomberg
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