With John Stanton at the helm, will a possible business deal between Clearwire Corp. (CLWR), T-Mobile USA Inc. (DTEGY) and Sprint Nextel Corp. (S) come to fruition? It’s a question at the top of my mind. Stanton knows his way around wireless mergers, as he participated in three large ones before. He knows how to get things done.
Stanton helped to form McCaw Cellular Communications Inc. in the early 1980s, which eventually sold to what is now AT&T Inc.; served as CEO of VoiceStream Wireless Corp., which he sold to Deutsche Telekom AG for $35 billion in 2003; and formed Western Wireless Corp., which eventually sold to Alltel Corp. for $6 billion in 2005.
Clearwire CEO Bill Morrow’s resignation comes at the end of a week that started with rumors of a possible merger between Sprint Nextel and T-Mobile. The nation’s No. 3 and No. 4 operators, respectively, are separately struggling to keep up with their much-larger competitors. Mobile Symmetry CEO Jim Patterson goes so far as to say the United States is now a duopoly between Verizon Wireless and AT&T Mobility, as they accounted for more than 85% of wireless capital spending in 2010.
My friend and former colleague Jeffrey Silva, senior policy director at Medley Global Advisors L.L.C., said the Obama administration could greenlight a deal, despite concerns about German ownership in a U.S. telecom operator. (Stanton already got one sale to Deutsche Telekom by regulators.)
“While the Obama administration may not be enamored of the prospect of further consolidation in the wireless industry, regulators and antitrust officials might greenlight the transaction if they conclude a stronger No. 3 operator would be preferable to Verizon and AT&T distancing themselves from competitors,” Silva wrote. “But if policymakers suspect this integration might go awry, they might be less enthusiastic about blessing the union, because a soured transaction could bolster the positions of Verizon and AT&T. While it is a gamble for all involved, it is one they may be compelled to take.”
Beyond regulatory complications, there are technology complications and the basic “some mergers do not go well” ghosts of Sprint Nextel lurking around. Sprint Nextel ultimately holds the cards because it is the largest of the three companies and owns the majority stake in Clearwire. But a three-way deal with Clearwire could be the 4G solution (ultimately LTE) for both T-Mobile and Sprint Nextel, and give a combined company enough customers to mount an effective campaign against AT&T and Verizon.
The real question for all three companies is this: Is it better to keep trying to survive on their own or try to make something new, in spite of all of the problems and complications that likely will arise?
