Blog Post

Reports: Sprint gives up on T-Mobile merger; CEO Dan Hesse out

Sprint(s s) is dropping its pursuit of T-Mobile(s tmus) as the acquisition’s chances of passing regulatory muster fade, according to a breaking news item from the Wall Street Journal. And the bungled deal may have cost CEO Dan Hesse his job; Bloomberg is reporting that Sprint will announce a new CEO as soon as tomorrow.

Re/code is reporting that the interim CEO will be Brightstar founder and CEO Marcelo Claure. He joined Sprint’s board in January after Sprint’s corporate parent SoftBank bought a controlling stake in Brightstar last year. Brightstar handles the phone distribution and logistics for the major U.S. carriers.

Sprint never officially made a bid for its smaller rival, so there is technically nothing to withdraw. But for the last six months Sprint chairman and SoftBank CEO Masayoshi Son has made it plain T-Mobile was in his sights and tried to convince both regulators and the public the creation of a third mobile mega-carrier was a good idea.

Per usual, no official statement came from Sprint. Instead unnamed sources told the Journal and Bloomberg that Sprint was abandoning the merger because the regulatory challenges are too steep to overcome. Neither Bloomberg, nor the Journal had any more details, but both reported that Sprint would be making an official announcement tomorrow.

The Sprint-T-Mobile merger was always a bad idea. While pitched as a way for Sprint to achieve scale so it could press its attack on AT&T(s t) and Verizon(s vz), a merger of that magnitude would have mired the combined company in an integration nightmare. Not only are both carriers huge corporations, but they run fundamentally different network technologies.

Last decade, Sprint bought Nextel, another carrier with a different culture and network technology, and it’s been reporting quarterly losses and shedding customers pretty much ever since.

That didn’t stop Son from pursuing T-Mobile with a passion. He made every sort of outrageous promise such as his claim that Sprint-T-Mobile wouldn’t just reinvigorate mobile competition but home broadband competition as well. Regulators, however, didn’t look very fondly on the deal. In an interview with Gigaom last year, FCC Chairman Tom Wheeler said he wanted to preserve the current level of of wireless competition in the U.S.

So what’s next for Sprint, assuming the reports of the deal’s demise are accurate? It will have to tackle the market alone or look for smaller carriers to buy. The carrier has loads of spectrum and a plan to create one of the most advanced and highest-capacity LTE networks in the world, but as its become bogged down in behind-the-scenes negotiations with T-Mobile, Sprint has dragged its feet on deploying that network.

Meanwhile, T-Mobile has other suitors. Last week, French ISP Iliad revealed a $15 billion bid for half of T-Mobile’s shares. Though news reports state that T-Mobile is rebuffing that initial offer, the Iliad deal has one thing going for it: It’s sure to get regulator approval.

This post was updated several times Tuesday afternoon as more information became available.

25 Responses to “Reports: Sprint gives up on T-Mobile merger; CEO Dan Hesse out”

  1. Marcus McBride

    William T. Esrey was the man! When he left Sprint, it was game over. The board should have fought tooth and nail to keep him. I left after the WorldCom merger was announced. Cashed out at around $120.00 a share. Thanks Bernie and Bill!

  2. I miss NEXTEL!
    Sprint was all about the Sprint way and moving everything to Overland Park. Never did listen to any of the Nextel employees. Drove the PTT into the ground.
    Yes, I’m one of the 500 laid off in 2007. The no class Sprint could not wait until I returned from Vacation to tell me I was being laid off in 30 days, They had to call me on Vacation to rub it in…
    Nextel was a first class outfit and the Nextel Folks I worked with in Reston and Dulles Hangar were top notch!

  3. Johnny Noitall

    Before passing judgement on Masayoshi Son and his “outrageous promises” read his wikipedia page and see if he kept the outrageous promises he made in Japan, including donating his whole salary to the victims of the Fukushima power plant disaster just because he can.

    He also royally reamed his government for allowing the company to build the power plant without adhering to regulations.

  4. Michael Keudel

    About time that Dan Hesse was shown the door, he destroyed the value of Nextel, decimated its workforce and Sprints while he was at it, spent untold Billions on the Netel merger, buying control of the Clearwire, building a piece of crap network, and then abandoning that, and now 7 years after they finally decide to roll out LTE. Getting laid off from that company was the best thing that ever happened to me, worst company I have ever worked for. I have never in my life seen a CEO screw up as bad as Hesse has and maintain his job this long, glad he didn’t get his hands on T-Mobile to screw that company up.

    • Jerell little

      Michael, the former CEO prior to Dan Hesse, Gary Foresee, was the numb nut who bought Nextel and ran that service into the ground. Dan Hesse came in and fixed all of that mess and changed the game with the simply everything plan for 99 bucks… He was the one that saved Sprint and proof is in the financials, just review the quarterly statements..

    • JustAComment

      Michael Keudel :: If you are a former employee, you should know that the Nextel deal was the work of the prior CEO … Gary Forsee … not Hesse’s doing. Forsee seemed hellbent on driving Sprint to bankruptcy.

    • GigaOm Reader

      Michael Keudel: Sounds like you have a case of sour grapes.

      Hesse deserves credit for bringing Sprint out of the death spiral, improving customer service from last rank to first, planning the network overhaul, and setting up the company for long-term success with the Clearwire and SoftBank transactions. Heck, he even put himself out there in the public eye by appearing in Sprint commercials.

    • Butch Croan

      In all fairness it was the CEO before Hesse that screwed up the Nextel Merger, and he was replaced by Hesse after failing to move onto the new spectrum given as part of a 900MHz rebanding deal. Do not get me wrong Hesse was an idiot for outsourcing Engineering & Operations like he did and then expect to be in control of his own destiny at a time when he actually needed tighter control. DanHesse was a marketing type with really poor skills in operations so the handwriting was on the wall if the board had any clue themselves so essentially the board is to blame for hiring a man who was responsible for much of the demise AT&T Wireless. What was it Einstein said about doing the same thing over and over and expecting different results ??? LOL !! WTF was the board doing ???

    • Down And Dirty Donnie

      Dan must have been selective in his “screwing”. The Rio Rancho Call Center found management reinvigorating employees, promoting long term employees who had been ignored thanks to in-house political garbage (reasons) AND rewarding those who were in line for wage increases, but had been ignored because they were outside the ‘clique’. Thankfully many of the ‘laid off’ employees deserved to be shown the door as they had been surviving due to their ‘buddy-pal interaction’ with the elite who always seemed to enjoy a few ‘free drinks’ and a back-slap at end of shift. I was sorry he was the beating-post and used as an excuse to trim the ranks. The blame was improper and internally generated by the ‘slackers’ who like it the old way; buy the so-called ‘leaders’ a beer or three and never worry about PERFORMANCE. Dan killed this unfair practice, showed the ‘slackers’ the door and best of all rewarded those who obviously were loyal and hard working employees who were left behind due to their LACK OF ‘butt kissing’.

  5. John B.

    Since when does two different technologies cause a problem? AT&T and VZW have had no problem converting to either CDMA or GSM respectively. Add to the fact that LTE will be eliminating both very soon. IDEN was a different breed to work with due to how it operated. VZW or AT&T may have had the same issues if had purchased Nextel.

    In any event, I hope both carriers can press on and create some viable competition for the two largest. With a failed merge and failed attempt to collude for ample low band spectrum, these two carriers have a tough climb.

    • Butch Croan

      You apparently know very little about Dan Hesse to not include him in any comment about bumbling idiot. I suggest you talk to former AT&T Wireless employees about how he destroyed the company, and made it a buyout target for ABC Cingular!!!

  6. Paymon Rayetparvar

    “FCC Chairman Tom Wheeler said he wanted to preserve the current level of of wireless competition in the U.S.”

    That Tom Wheeler wanted to do anything helpful for anyone but the other major wireless companies is laughable.