Sprint, the third largest mobile phone operator in the United States, has given up on plans to acquire T-Mobile US, which is the fourth biggest.
Reportedly Sprint has accepted that the competition regulator and the Federal Communications Commission were not going to give permission as they want to maintain four large US mobile carriers saying that is “good for American consumers”.
The decision could help French telecoms firm Iliad, which trades as Free, and is also keen to buy T-Mobile US.
The end of Sprint’s interest caused a fall in the shares of T-Mobile US owner Deutsche Telekom, which wants to pull out of the United States.
The German company, which earns about a third of sales and a fifth of core profits in the United States, has tried to sell its US subsidiary twice since late 2011 because it believed that as the fourth-biggest mobile network operator T-Mobile US lacks critical mass to compete with the bigger operators.
The move is a rare setback for Sprint’s Japanese parent SoftBank, whose billionaire founder Masayoshi Son had seen the acquisition as key to taking on US market leaders AT&T and Verizon.
SoftBank bought 80 percent of Sprint last year for some $20 billion, just one of many aggressive acquisitions by Son who has built SoftBank from a small software publisher into Japan’s second-most valuable listed company. He has vowed to make SoftBank the world’s largest Internet media company.
Although Sprint’s earnings have improved on the back of cost reductions, without T-Mobile its path to growth is unclear and it is expected to struggle.
“If you add up Sprint’s annual capital expenditure and interest payments, it cannot cover them from its annual operating cash flow. If things stay the way they are, they’ll be in dire straits,” said Norito Shimizu, senior researcher at InfoCom Research.