With the slow economy in recent weeks, we have seen many mergers and buyouts taking place. From defense contractors, who manufacture rocket engines for the space program, to American International Group, Inc. (NYSE:AIG) intended purchase of the Hartford Group’s broker, the big news on Wall Street has been of companies merging with other companies in order to weather the economic storm.
Could a major cell phone carrier buyout be the next big piece of news? According to sources with direct knowledge of the matter, T-Mobile is involved in preliminary talks for a merger deal early in 2013. While this story is, as of now, not confirmed, we do believe the economic downturn could also be the perfect catalyst for such a merger. Our source declined to comment on who the buyout company is. Last year, AT&T dropped its bid of T-Mobile, after pressure from regulators, competitors and the public.
With Nokia Corporation (NYSE:NOK) struggling to keep up with Apple Inc. (NASDAQ:AAPL) and Samsung in the race to build the next smart phone, many carriers have shown losses in revenue over the last quarter. These losses could contribute to a decision to form a merger, or even possibly set up a buyout of T-Mobile, or other smaller carriers by one of the major players in the market.
So, who would be interested in spending the money to buy out T-Mobile? Verizon Communications Inc. (NYSE:VZ), Sprint Nextel and Corporation (NYSE:S), would be the first large companies one would think of, if a buyout should take place. While many Americans are switching to prepaid services, in order to stay away from lengthy contracts and higher priced packages, a buyout of a smaller company, such as T-Mobile, would make perfect sense for these cellular giants.
Such a buyout would enable the larger company to add a sizable customer base to its revenue sources, and would allow them to offer stronger coverage to the existing customers of the smaller company. If Verizon, for instance, were to buy out T-Mobile, they would add roughly 30.8 million customers to their existing customer base of approximately 67 million. Such a buyout would make Verizon the largest single cellular carrier in the U.S., by a margin of over 25 million customers.
T-Mobile has much to offer whoever their prospective buyer might be, and it’s easy to see why they would attract the attention of the larger corporations. While our source hasn’t indicated exactly who was involved in the merger, he did say “…the future lies in cell phones. If there are any mergers, it might be with T-Mobile, or some other small phone company in 2013.” This would indicate that something big is about to happen in the way of cellular carriers in the United States.
As I said before, this story has not yet been confirmed by any of the carriers as of yet, so we will just have to wait and see. However, if the talks are successful, we could see a new leader in the world of cellular service, one who would be unsurpassed in earnings and growth potential.