Sprint ditches T-Mobile deal over regulatory hurdles; CEO set for the high jump?

6 Aug 2014

Sprint Corp and its Japanese parent company Softbank Corp have decided not to press ahead with their planned USD32 billion acquisition of T-Mobile US, multiple press reports have suggested, effectively leaving the door wide open for surprise suitor Iliad of France. It is believed that the anticipated regulatory pressure was deemed to be an insurmountable stumbling block; both the Federal Communications Commission (FCC) and the Department of Justice (DoJ) have made no secret of their desire to retain four nationwide wireless operators.

In addition, according to the Wall Street Journal, Sprint is ready to replace CEO Dan Hesse – who has been at the helm since 2007 – with Marcelo Claure, the head of mobile phone distributor Brightstar, possibly as early as this week; Softbank acquired control of Brightstar in January and quickly installed Claure on Sprint’s board. In recent weeks Hesse has been strongly criticised for his extremely lucrative compensation package of USD49 million in 2013 – a figure which reputedly made him the highest-paid executive in the US wireless industry last year.

Going forward, T-Mobile US owner Deutsche Telekom (DT) is likely to be bracing itself for an improved bid by Iliad, which tabled a USD15 billion offer for a 56.6% stake in the US cellco late last week. Indeed, according to Reuters, the French firm has entered into negotiations with a number of prominent US companies regarding a joint approach for T-Mobile US. According to the news agency, Iliad is in talks with US satellite TV giant DISH Network and cable operators Cox Communications and Charter Communications. Similarly, Iliad is also talking to infrastructure and pension funds such as Ontario Teachers Pension Plan (OTPP) and sovereign wealth funds including Singapore’s GIC. The two named entities demonstrated their interest in the telecoms sector earlier this year when they agreed to back France’s third mobile operator, Bouygues Telecom, in its failed bid for domestic rival SFR.