T-Mobile plans to overtake Sprint as the No. 3 wireless US carrier in subscribers by the end of 2014, Chief Executive Officer John Legere tweeted.
While T-Mobile has been adding record numbers of subscribers through promotions and campaigns, Sprint customers have been leaving in droves due to service problems arising from carrier’s network overhaul.
Some analysts fear that Sprint's decision to give up its dream of merging with T-Mobile US could lead to a wider price war as the top carriers slug it out in a nearly saturated market.
Sprint might follow the lead of T-Mobile, which added more subscribers than all of its competitors combined in the first quarter through aggressive promotions and campaigns that addressed customer frustrations with the industry.
If Sprint Corp acquires T-Mobile US, it could save up to $6.6 billion on network, equipment and operating costs, but it will have to slash its prices to match the target company's steep discounts, analysts said. Sprint, under Chairman Masayoshi Son, has been hesitant to join other carriers in cutting fees because a decline in revenue would hurt its stock price, analysts say.
Its shares have risen 8 percent since Dec. 12 on speculation it was looking to acquire T-Mobile from Deutsche Telecom AG.
"I think he's realized he's between a rock and a hard place. Sprint’s prices are much too high, but if Sprint cuts prices, its stock will fall," said Craig Moffett, lead analyst at MoffettNathanson. "They don't come close to justifying their stock price."
The price differential is just one hurdle that Sprint, which is 80 percent owned by Japan's SoftBank Corp, would face if it pursues a deal to buy T-Mobile.
Unease about whether Sprint can overcome regulatory hurdles sent its stock down 9.3 percent to $8.77 since details emerged of a potential bid. Sprint customers spend an average of $62 a month, compared with $50 for T-Mobile. "It is not a sustainable situation. If the companies merge, they will need uniform pricing across the company," said Michael McCormack, a lead analyst at Jefferies.
AT&T said it expects to cut programming costs for its U-verse television product by more than 20 percent with its $48.5 billion purchase of satellite television provider DirecTV - savings that will be the biggest portion of the deal's cost benefits.
The acquisition will also enable AT&T, the country's No. 2 wireless carrier, to offer a pay TV and wireless bundle to an additional 45 million US customers, the company said in a regulatory filing with the Securities and Exchange Commission. The filing adds details to a bid that has boggled some analysts who see little benefit to the mobile carrier.
Verizon's CEO Lowell McAdam shot down rumors that the company was in potential merger talks with satellite operator Dish Network, days after rival AT&T announced plans to buy no 1. US satellite operator DirecTV.
"I know there are reports out there that we are talking to Dish. I can tell you now that is someone's fantasy. There were not, and there are not, discussions going on with Dish," McAdam told investors at the JP Morgan Global Technology, Media and Telecom Conference.
"I don't think owning a satellite company is something I'm interested in at this point," he said adding the company's focus was on over-the-top programming, meaning content utilized over a network, but not offered by a network operator.