Analyst makes case for Sprint buying MetroPCS rather than pursuing T-Mobile

09/11/2012 1:13 PM

05/16/2014 7:40 PM

Sprint Nextel Corp., under pressure to consolidate the smaller competitors in the U.S. wireless industry, may have success going after a prepaid carrier like MetroPCS Communications Inc., Goldman Sachs Group Inc. said.

That kind of deal would be easier to complete than trying to buy T-Mobile USA Inc., a larger carrier that AT&T Inc. failed to acquire last year, Jason Armstrong, a Goldman Sachs analyst in New York, said in a report issued Monday.

Sprint’s stock price, which has more than doubled this year, is stoking speculation that some kind of deal will happen, he said.

Scott Sloat, a spokesman for Overland Park,-based Sprint, declined to comment.

Sprint’s balance sheet, particularly its $21 billion in gross debt, would make an acquisition of T-Mobile USA impractical, Armstrong said. Either MetroPCS or Leap Wireless International Inc., another pay-as-you-go carrier, are the more probable takeover candidates, he said. Sprint and T-Mobile USA also could form a network-sharing agreement, letting them compete more effectively with Verizon Wireless and AT&T.

A Sprint takeover of T-Mobile is “aspirational,” rather than likely, said Armstrong, who has a neutral rating on the shares. “A smaller prepaid-centric deal may be the more logical route for now if Sprint determines to pursue M&A.”

Sprint and T-Mobile rank a distant third and fourth in the U.S. wireless industry, with a combined 27 percent of the revenue generated by national carriers, according to Goldman Sachs. Verizon ranks first, with 37 percent, and AT&T is second, accounting for 35 percent.

Sprint shares fell 1.4 percent to $5.08 in midday trading Tuesday. The stock had climbed 120 percent this year. MetroPCS, up 13 percent this year, rose 0.8 percent to $9.85 today.


Join the Discussion

The Kansas City Star is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Terms of Service