In a stinging decision, the Sprint board reportedly vetoed a potential acquisition of MetroPCS. According to the Reuters report, Sprint CEO Dan Hesse was spearheading a deal that would bring MetroPCS under the control of Sprint. Hesse had been working on the deal for weeks and was close to making an announcement said sources familiar with the matter. The reason for the board’s decision to pull the rug out from under the deal was not known.
Sprint may have eyed regional carrier Metro PCS because the two carriers use the same CDMA technology and their market position as #3 and #6 carrier would complement each other. Sprint, however, is under increasing financial strain as it tries to build out its 4G network and shoulders a $15 billion deal with Apple to carry the iPhone.
Analysts are relieved this deal was averted as a MetroPCS merger could have cost the cash-strapped company as much as $8 billion. Roe Equity Research Kevin Roe said, “The execution risk at Sprint is already at an extremely heightened level. To pile this acquisition on would be irresponsible.”
This decision could also be a sign the board is losing faith in Hesse’s ability to lead the company as it struggles to find direction in a mobile market that is rapidly changing. Says Alliance Bernstein analyst Craig Moffett, “It’s very unusual for a deal to get this far, for it to be recommended by the buyer’s CEO, and for it then to be rejected by the buyer’s board.” With MetroPCS off the table, Sprint could look to Leap Wireless as a potential target. Neither Sprint, now MetroPCS would comment on the story said Bloomberg.