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Sprint expects to take part in US consolidation

CEO Dan Hesse hints the firm could be an acquirer next year, but Verizon says its own role will be limited

By CAROLINE GABRIEL

Published: 21 September, 2012

READ MORE: M&A | US | LTE

Despite the failure of the AT&T/T-Mobile merger last year, US carriers expect further consolidation in their sector. Verizon believes it will play only a limited role, since its spectrum purchase deal with four cablecos was agreed, giving it sufficient capacity for 4-5 years, according to CFO Fran Shammo. However, Sprint is still at the center of ongoing merger rumors.

Shammo told a Goldman Sachs investor conference that he expected there to be fewer carriers in the US in future, but Verizon would face too many regulatory hurdles to make a major deal. "I think it would be difficult for me to sit up here and say Verizon will acquire another wireless carrier," he said, though the firm was always looking for deal opportunities. Asked about the possibility of acquiring its wireless joint venture partner Vodafone, he said such a deal was not being considered, but nothing could be ruled out. "If there is a willing seller, there is a willing buyer, but the price has to be right," he said.


Meanwhile, Sprint CEO Dan Hesse told the same conference that he expected to take part in

industry consolidation in the near term, and could be an acquirer as it sought to increase its scale. Sprint's share price has more than doubled this year, leading to speculation that it could be in a better position to make acquisitions.

However, any deal - whether Sprint was the buyer or prey - would be complicated by its very specific mobile broadband spectrum and network plans, under its ambitious multiband, multi-technology Network Vision initiative. Any deal would depend on network compatibility and integration risk, Hesse conceded.

However, he still seemed to be thinking in terms of possible M&A happening within two years. "My strong preference would be to not significantly change the Network Vision build plans until the middle of next year," Hesse said, though he added that, since regulatory review of major mergers takes 9-12 months, that would be the right timeframe anyway and that, once consolidation started up again, "I expect over the long term that Sprint will play a role in it".

The comments helped boost the shares of potential takeover targets for Sprint such as Clearwire (up 13% according to Bloomberg), MetroPC (up 5.2%) and Leap (up 1.7%). Sprint is also on the look-out for new spectrum and Hesse said the firm would "talk to companies like Lightsquared, if that comes back". The cello previously had a network and spectrum sharing agreement with the LTE-over-satellite venture, but that was ended when the start-up filed for bankruptcy protection. Alternative partnerships could become essential to improve Sprint's scale and ability to challenge frontrunner Verizon in 4G. "We have a competitive disadvantage in terms of LTE," he said. "You don't increase your price when you have a footprint disadvantage."

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