Jeff Kagan: Sprint, T-Mobile Deal Fading – What’s Next?

As the last few weeks have passed it appears the stars are not lining up for the potential Sprint (S) Softbank merger with T-Mobile (TMUS) . And it hasn’t even been officially proposed yet. We have heard from several US government regulators, and not one sounds like they would give it thumbs up. So what’s next for these three companies if this deal does not happen?

Let me start by saying the deal is not dead. It could still be approved. After all the same anti-acquisition talk was happening before Softbank eventually acquired Sprint and that deal still happened. So it is still possible for this deal to be done.

I have learned not to underestimate Softbank CEO Masayoshi Son and Sprint CEO Dan Hesse. All that has to happen is for US regulators to explain what the problems are, and for them to agree to terms that would satisfy everyone.

However a similar merger between AT&T (T) and T-Mobile was denied because regulators wanted to keep four major competitors in the space rather than three.

And since regulators don’t see the need for this more sizeable competitor, I don’t think they will bend and agree to this deal either for the same reason. However, things have changed in the past so we should be aware it could happen.

If the deal does not go through, then what can we expect next?

Sprint (with Softbank behind them) wants to create a new kind of wireless company. Sure, they want to be a successful wireless competitor with smartphones and tablets. But they also want to transform the entire wireless space. They want to provide a variety of innovations that the wireless industry does not yet do.

To do this, they will need to first transform their company from the inside and out. Softbank sees an enormous opportunity in the United States market. I think the Sprint acquisition was just the first step of several.

As of right now, Dan Hesse is the CEO of Sprint. I think Masayoshi Son, CEO of Softbank will use Hesse as he builds a new kind of company, with Sprint as their main wireless network component.

Don’t think that we understand wireless. We don’t. We only understand where wireless has come from and where it is today, but we have no idea what wireless will turn into over the next few years. It’s a rapidly and constantly changing industry.

I hear this same story from AT&T and Verizon (VZ) as well. Expect industry wide reinvention.

As far as T-Mobile, I am convinced their CEO John Legere is positioning the company to be acquired. That does not mean it will happen. So as a fall back he is also strengthening T-Mobile as a stand-alone competitor.

In fact, if T-Mobile is not acquired, they may be on the hunt for smaller carriers themselves. This is one way to strengthen and grow the company.

Whatever happens and whoever Sprint, Softbank and T-Mobile decide to merge with, don’t forget the US regulator has to agree and that can be the tough part. Regulators agree to more mergers when there is a republican President.

However I think a US regulator would more readily approve an acquisition involving Sprint or T-Mobile with a smaller competitor.

I think Sprint and Softbank want to remain in the driver’s seat. However, I think T-Mobile would be just as happy being acquired and having their senior executives stepping aside.

So what can we expect next? The first option of Sprint acquiring T-Mobile isn’t even on the table yet. That has to play itself out one-way or the other.

If not approved, don’t expect any of them to sit quietly. I would expect to see them all make another move pretty quickly. With whom is the next question.

Either way, consolidation in wireless will continue for years to come. And more than that, transformation of the wireless industry will continue among all the players including AT&T Mobility, Verizon Wireless and all the networks, handset makers and other industries like automotive, healthcare, retail and more.

The writing is on the wall. We expect to see growth from AT&T and Verizon. Until very recently we didn’t expect to see growth from Sprint and T-Mobile. However that may be changing.

The next few years will be defined by change and transformation. Who will lead going forward is the next question. It just depends who will get together. So let’s keep our eyes open.