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 The move is a rare setback for Sprint's Japanese parent SoftBank
Corp, whose billionaire founder Masayoshi Son had seen the
acquisition as key to taking on U.S. market leaders AT&T Inc and
Verizon Communications Inc.
Sprint, the No. 3 U.S. carrier, and T-Mobile have not ruled out
consolidation in the future but concluded that a deal is unlikely to
be approved at this time, the sources said. U.S. regulators have
insisted that they want to keep the number of major wireless
carriers at four.
"We didn't think the opposition would be this strong," a SoftBank
executive said, but added: "The environment will definitely change".
The failure to reach a deal could give added impetus to a rival bid
for T-Mobile by French telecoms firm Iliad. Iliad made a lower bid
than Sprint but is in talks with U.S. cable and satellite companies
to sweeten its offer.
In the wake of the failed talks, Sprint will appoint a new CEO -
Marcelo Claure, founder of mobile phone distributor Brightstar Corp
which was acquired by SoftBank last year, a separate person with
knowledge of the matter said. Claure, who has won a string of awards
for entrepreneurship, joined Sprint's board in January.
He will replace Dan Hesse who has been CEO of Sprint since 2007.
Hesse led a rip-and-replace overhaul to modernise Sprint's network
but it caused cellular sites to go black and the company to
hemorrhage subscribers.
Sources declined to be identified as the matter has not been
disclosed by the companies publicly. Representatives for Sprint and
SoftBank declined a request for comment. T-Mobile did not
immediately respond to a request for comment.
Sprint shares were down 16 percent and T-Mobile shares were down 9
percent in after-hours trading.
SoftBank's shares closed down 3.5 percent on Wednesday.
SPRINT SET FOR HARDER RACE
Although Sprint's earnings have improved on the back of cost
reductions, without T-Mobile its path to growth is unclear and it is
expected to struggle.
"If you add up Sprint's annual capital expenditure and interest
payments, it cannot cover them from its annual operating cash flow.
If things stay the way they are, they'll be in dire straits," said
Norito Shimizu, senior researcher at InfoCom Research Inc.
SoftBank bought 80 percent of Sprint last year for some $20 billion,
just one of many aggressive acquisitions by Son who has built
SoftBank from a small software publisher into Japan's second-most
valuable listed company. He has vowed to make SoftBank the world's
largest Internet media company.
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The SoftBank executive added that despite the setback, the company
had plenty of other irons in the fire in the U.S. market, citing
last month's poaching of Google Inc Chief Business Officer Nikesh
Arora to head up SoftBank Internet and Media Inc, a planned U.S.
subsidiary.
ILIAD'S CHANCE?
Sprint had agreed to pay $40 per share under the broad terms of an
agreement worked out with Deutsche Telekom AG T-Mobile's majority
owner, following months of talks.
By contrast, Iliad has so far offered only $33 per share for a 56.6
percent stake in T-Mobile. Possible partners to help it sweeten its
bid include Dish Networks, Cox Communications and Charter
Communications, sources have said.
T-Mobile has taken the industry by surprise with aggressive pricing
plans and no-contract campaigns, boosting its customer numbers and
posting its first net profit in a year in the second quarter.
Roger Entner, analyst at Recon Analytics in Boston, said the
announcement could signal the tables may have turned on Deutsche
Telekom.
"As long as there was a Sprint offer on the table, bargaining power
was with Deutsche Telekom. Now the bargaining power is with Iliad,"
he said.
The failure of the Sprint-T-Mobile talks was first reported by the
Wall Street Journal.
The announcement marks the second blockbuster deal to be abandoned
on Tuesday after Rupert Murdoch pulled the plug on Twenty-First
Century Fox's bid for Time Warner.
(Additional reporting by Liana B. Baker in New York and Teppei Kasai
in Tokyo; Editing by Edmund Klamann, Lisa Shumaker, Ken Wills and
Edwina Gibbs)
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