Thursday, September 1, 2011 at 11:51 am.

Why Sprint shouldn’t get too excited about AT&T’s T-Mobile setback

Sprint Nextel, which has been loudly fighting AT&T’s proposed takeover of T-Mobile, celebrated yesterday when the U.S. government moved to block the deal. Yes, in a sense, it is good news for Sprint: It doesn’t have to compete with a ridiculously huge AT&T, just the dramatically huge AT&T that exists today.

But beyond the headline victory, and the pop in Sprint stock yesterday, it’s not all good news for Sprint.

  • It’s not like Sprint can go out and buy T-Mobile now. Even if Sprint could structure the deal financially, the government has basically said it’s opposed to the idea of four nationwide carriers becoming three. That seems to prevent a Sprint/T-Mobile merger as much as an AT&T/T-Mobile combo.
  • Now Verizon Wireless really won’t be buying Sprint after AT&T’s big deal had wrapped up. Goodbye, exit strategy. If the Feds can’t handle the idea of three nationwide carriers, they definitely can’t handle two. (That doesn’t necessarily prevent Comcast or another company from buying Sprint or T-Mobile, though.)
  • Sprint still has to compete with T-Mobile now. The idea that AT&T might curtail T-Mobile’s aggressive pricing might have positioned Sprint as the only nationwide “value” player in the industry. Now T-Mobile has to stay out there and keep fighting, and that could mean stealing Sprint’s customers, or at least driving up Sprint’s costs.
  • Sprint still has plenty of Sprint-specific problems that need solving. For example, what to do about a 4G LTE network? What to do about its big investment in Clearwire? What to do with the Nextel walkie-talkie business? What’s the plan if Sprint doesn’t get the iPhone this year? Even without buying T-Mobile, AT&T has far outpaced Sprint’s growth over the past few years.

All things considered, yes, AT&T’s inability to buy T-Mobile probably feels like a victory to Sprint. But it’s more complicated than that, and Sprint still has a lot of catching up to do.

Related: Verizon and AT&T have grown like crazy over the past 5 years, while Sprint is flat