U.S. Markets open in 4 hrs 22 mins

Sprint pulls the plug on T-Mobile deal, names new CEO

Hot Stock Minute

Sprint (S) has decided to go it alone, at least for now. The third-largest U.S. wireless carrier has abandoned plans to take over T-Mobile (TMUS). According to media reports, Sprint and its Japanese parent company Softbank called off its merger plans after strong resistance from regulators, despite months of intense lobbying. Regulators reportedly resisted the combination because there would be fewer companies to compete against Verizon (VZ) and AT&T (T), and it would mean fewer choices for consumers.

Yahoo Finance Editor-in-Chief Aaron Task was surprised that regulators made it tough for this deal to go through, especially with other big deal in the works, like AT&T and Dish Network (DISH), and Time Warner Cable (TWC) and Comcast (CMCSA). “Why would regulators block this deal, when you are looking to theoretically make a stronger third competitor to AT&T and Verizon?” Task asks. 

Sprint and T-Mobile had been working on a deal for months, valued between $31 billion and $50 billion. However, where Sprint failed, Iliad could succeed. Last week, the French telecom company made a $15 billion offer to buy a controlling stake in T-Mobile. Iliad is also reportedly planning on raising the bid. Task said it doesn’t look good for T-Mobile that the value of the brand keeps going down with each successive bid. 

Sprint also announced another major change Wednesday. The company will replace its current CEO Dan Hesse with Marcelo Claure. Claure joined Sprint’s board in January. He is also the founder of mobile phone distributor Brightstart, which was acquired by Softbank last year. Task said the fact that Dan Hesse, who has run the company since 2007, has lost his job over this, means that there were likely some internal issues at Sprint. He thinks Softbank founder Masayoshi Son, who is the chairman of the company, was not happy with the direction Sprint was going, and that he used the decision to drop the bid for T-Mobile as an excuse to make a change at the top of the company.

“The biggest thing that [Claure] brings to the table is that he has the support of Masayoshi Son, and they can change the direction of Sprint,” Task said.