Sprint is reportedly in talks with Deutsche Telekom about buying up T-Mobile USA, creating a single network part-owned by Deutsche but able to compete with AT&T and Verizon.
The talks, which Bloomberg reckons have been going on over the last few weeks, could result in T-Mobile becoming part of Sprint with Deutsche Telekom owning as much as half of the resulting company, though Bloomberg also suggests that T-Mobile buying up a chunk of Clearwire spectrum is an alternative plan.
T-Mobile certainly needs to do something, it's been bleeding customers for the last few years and hasn't the radio spectrum, or the funds, to build a 4G network to compete with those being offered by AT&T and Verizon. Deutsche Telekom did a similar deal in the UK, ending up with half ownership of Everything Everywhere, which was created from T-Mobile UK and Orange (the latter being France Telecom's UK operation).
Given its inability to build a 4G network, there has been much speculation that T-Mobile USA would be a flagship customer for LightSquared. LightSquared plans to build a national LTE (4G) network in radio spectrum usually reserved for satellite communications, and then wholesale that network to operators – with T-Mobile being the most obvious potential customer. But in fact it has been Sprint who has been talking to LightSquared about sharing cell sites, and even discussing the possibility of using LightSquared's network in preference to the Clearwire one in which Sprint has ownership.
That's probably just Sprint trying to drive down the rate it pays Clearwire for network access, beating it with a LightSquared-shaped stick with no intention of actually switching networks. Making the switch would mean migrating users to new handsets and all sorts of complexity, and with Sprint being the majority owner of Clearwire, it has no interest in beating the network provider too hard.
Merging with T-Mobile, on the other hand, would achieve economies of scale and remove the requirement for an additional 4G network (which would be bad news for LightSquared). Bloomberg reports that T-Mobile's valuation is the sticking point, which shouldn't be any surprise, but a deal would seem to make sense if an agreement can be reached. ®