T-Mobile forced into the arms of Sprint

T-Mobile might be forced to link up with Sprint Nextel after its owner’s $39 billion deal with AT&T collapsed.

Deutsche Telekom has been left in the lurch after AT&T gave in to the US regulators and dropped its bid for T-Mobile USA. It needed the cash from the sale to make a dignified Germanic exit from the US market and concentrate on Europe.

According to Reuters, DT’s chief executive Rene Obermann has lost a lot of time and will now have to invest in the US market or find a new way to exit the country. Since leaving the country will be too expensive, he is probably going to have another crack at a merger with Sprint.

Will Draper, head of telecoms research at Espirito Santo, said T-Mobile is run-down and lacks the spectrum it needs to build a network to handle the data volumes that US consumers and businesses use on smartphones.

Obermann told investors he was working on a long-term cunning plan for T-Mobile and the only real option that analysts can think of is a deal with Sprint.

Obermann said that in the long term, T-Mobile needed more spectrum and network capacity but he would not speculate about any inorganic steps or deals. An organic step is when you walk into dog mess, so we guess he’s not talking about anything like that.

Before talks with AT&T were announced in March, Deutsche Telekom was looking at a potential deal with Sprint. This involved a sale of T-Mobile USA to Sprint in exchange for a stake in the combined company.

However, Obermann changed tack and bet the farm on a deal with AT&T. The reason was that while a Sprint merger was better in the long-term in the United States, it would be a pain for Deutsche Telekom because it would need to invest in the new venture.

Sprint also needs cash thanks to a costly network upgrade and the fact that its agreement with Apple to flog the iPhone bled the outfit dry.