Sprint Dumps Hesse; Ends Pursuit of T-Mobile

August 6, 2014

By J. Sharpe Smith —

Hesse (Photo: BGR)

August 6, 2014 — The news surrounding the cellular industry’s third and fourth largest carriers has hit a fever pitch in the last 24 hours. Most recently, Sprint replaced Dan Hesse with Marcelo Claure as the company’s president and CEO. At the same board meeting, Sprint directors voted to end their $32 billion offer to buy T-Mobile, according a report in the Wall Street Journal.

Regulators have been making very clear from the beginning that they did not believe a merger of the number three and four carriers would not improve the competitiveness of the market.

The FCC’s displeasure with the prospect of a Sprint/T-Mo combo has been long suspected as it recently changed its spectrum holdings rules, which would have forced Sprint to divest its 2.5 GHz spectrum if it coupled with T-Mobile.

Additionally, the FCC is circulating a proposal to revise spectrum bidding credits to encourage the entrance of small businesses into the wireless carrier business, which notes the FCC’s desire to push beyond the current four major carriers, let alone collapse back to three.

Claure, 43, joined the Sprint Board of Directors in January and is the founder and CEO of Brightstar, a subsidiary of SoftBank.

“As president and CEO, Claure’s first priority will be to continue the build out of Sprint’s network by leveraging its strong spectrum holdings as well as ensuring that Sprint always maintains truly competitive offers in the marketplace,” the company said in a press release.

Hesse has served as Sprint’s head since December 2007, and led the company through a series of acquisitions, including the merger with SoftBank, and a multi-year overhaul of its nationwide network, known as Network Vision, including the shutdown of the Nextel network.

Even with the turmoil at Sprint, Jennifer M. Fritzsche, Wells Fargo senior analyst, expressed optimism that the carrier will turn a corner with the completion of the Network Vision build out and deployment at 2.5 GHz.

“Recall while S only has a 5×5 channel today, with the light up of the 2.5 GHz spectrum it will have multiple 20×20 channels and a spectrum position that would be significantly deeper than many of its peers,” she wrote.

Don’t Forget Iliad

Perhaps a bit lost in yesterday’s titanic announcements, T-Mobile rejected the $15 billion, or $33 a share, bid by cheeky French concern Iliad, according to the Wall Street Journal, refusing to open its books to them. The bid was rumored to be too low and cost synergies of the merger exaggerated. The only upside of the deal appeared to be the fact that it would not raise the ire of antitrust authorities.

Iliad’s odyssey may not be over. Reuters reports that the firm, which controls 13 percent of the French market with a low-cost service, will most likely come back with a sweetened deal.