Deutsche Telekom Could Buy Sprint Just for its Customer Base

Implications: 1.      If Deutsche Telekom acquires Sprint, it would get a large number of customers already set up for service, but with many perhaps contemplating leaving the third largest wireless carrier in the U.S. 2.      T-Mobile USA comes in and shows them its customer satisfaction scores and encourages them to come over to its network -- with some incentives thrown in to make the switch. 3.      Deutsche Telekom may see value in Sprint’s optical core network.

Analysis:  One could make the assumption that Deutsche Telekom will not take a hard look at Sprint until it gets rid of Nextel.   There is the elimination of yet of another network based on a different technology -- and the rebanding issue goes away as well.   In addition, the matter of a foreign-based operator taking over Nextel’s push to talk business, which is heavily used by federal government agencies, becomes moot.   

It would be still hard to imagine why an international carrier would want to be left with two incompatible networks – GSM and CDMA.  One of Sprint’s problems has been that it could not offer a phone that worked when subscribers traveled overseas.    A rather long-shot possibility would be that Deutsche Telekom takes on the potentially  high cost of operating two networks at the same time – looking to converge them eventually to LTE.  Perhaps it is determined that the costs are highest in the back office as opposed to in the network.  When it came to the back office, Sprint never figured it out – and Nextel knew even less about this subject.  With T-Mobile USA seemingly having its act together on billing and customer service, maybe the CDMA network could be run a lot more cost-effectively.   However, it might be much easier just for Deutsche Telekom to divest the CDMA assets.  Even if it loses a good portion of the Sprint subscriber base to competitors, it still could be worth the investment if the German company gets it at a reasonable price.  In addition, it would avoid the possible difficulty with U.S. regulators…[possibly not] permit[ting] a tie-up of the No. 3 and No. 4 carriers.”   Deutsche Telekom knows first hand that size for its own sake is not everything.  T-Mobile USA is doing quite fine and it is much smaller than the three top competitors.   Getting Sprint’s long-haul fiber network might also be advantageous to Deutsche Telekom just for capacity purposes.  It should be noted that T-Mobile USA is currently looking to fill jobs that require optical expertise.