Sprint May Take Another Look at PCS

by Marc Bastow | October 5, 2012 11:42 am

Hot on the heels of Deutsche-Telekom’s (PINK:DTEGY[1]) T-Mobile USA announcement of an agreement to buy MetroPCS (NYSE:PCS[2]) comes word from various news organizations including Reuters that #3 U.S. wireless carrier Sprint (NYSE:S[3]) is considering making a counter-offer for PCS.

Sprint185 Sprint May Take Another Look at PCS While a decision on the move may be a little bit off down the road, based on a Wall Street Journal story citing unidentified sources, Reuters is reporting[4] the Sprint board of directors is meeting at 12:00 p.m. Friday to discuss what action to take at this time.

Sprint has already been down this road, as the company took a look at the carrier and decided pass back in February, a decision based on holding off on spending money on an acquisition when the company needed resources for network upgrades.

However, with the landscape changing between the announced merger and the unsuccessful attempt by market leader AT&T (NYSE:T[5]) to buy T-Mobile last year, a fresh look at T-Mobile may be in order for Sprint.

Trailing well behind[6] both AT&T (NYSE:T[5]) and Verizon (NYSE:VZ[7]), Sprint might actually consider a run at the combined T-Mobile/PCS entity which will be 76% owned by Deutsche-Telecom in order to increase market share and perhaps cut costs even further.

A combined Sprint-Metro PCS entity could see cost savings of $8 billion to $9 billion per year based on analysis of the transaction in February, and with Sprint stock now trading at almost double its price in February, the company could offer stock as part of an overall package valued at around $12.50 to $15 per share for PCS.

One critical component to a merger of course would be approval at the Federal Communications Commission and through the Justice Department’s anti-trust division.

Sprint shares are up over 2% in Friday morning trading, while PCS shares are up just over 1%.

Written by Marc Bastow who as of this writing was long VZ

Endnotes:
  1. DTEGY: http://studio-5.financialcontent.com/investplace/quote?Symbol=DTEGY
  2. PCS: http://studio-5.financialcontent.com/investplace/quote?Symbol=PCS
  3. S: http://studio-5.financialcontent.com/investplace/quote?Symbol=S
  4. is reporting: http://www.reuters.com/article/2012/10/05/us-metropcs-sprint-idUSBRE89313A20121005
  5. T: http://studio-5.financialcontent.com/investplace/quote?Symbol=T
  6. Trailing well behind: http://investorplace.com/2012/10/sprint-continues-an-amazing-run-to-nowhere-s-t-vz-bac-rj/
  7. VZ: http://studio-5.financialcontent.com/investplace/quote?Symbol=VZ

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