Why Comcast & Not T-Mobile Should Buy Sprint

Sprint LogoShares of Sprint got a boost this morning after the Sunday Telegraph reported T-Mobile parent Deutsche Telekom (s dt) AG may acquire the carrier and merge it with its own T-Mobile USA. But a tie-up with Comcast (s cmsca) would be a better fit for the beleaguered carrier.
Just a week after Deutsche Telekom announced plans to merge T-Mobile UK with Orange, the company reportedly called in banking advisers to study a potential takeover of the American operator, which has a market capitalization of $12.45 billion. But Deutsche Telekom’s move may serve as a catalyst for Comcast’s entry into wireless. The nation’s largest cable company has been hoarding cash since its failed $54 billion bid to take over Disney in 2004, amassing a bankroll of $4 billion in cash and short-term investments and leading some analysts to speculate it has another big-budget acquisition in mind. And we’ve known Comcast is serious about mobile since last year’s hire of Dave Williams, former CTO of Telefonica O2 Europe.
Sprint (s s) is attractive in a number of ways. It’s offloaded its network-management operations to Ericsson, eliminating the need for any buyer to deal with the hassle of operating the infrastructure. It’s also building out the WiMAX technology that Comcast is already backing, and the carrier’s portfolio of devices has vastly improved with hardware such as the Palm Pre and Pixie and the upcoming Android-based Hero. And Sprint’s wireline businesses could offer Comcast an advantage when it comes to access and peering agreements for middle mile access.
However, analysts say a Deutsche Telekom tie-up could be a huge lift for T-Mobile USA, largely by removing the threat of Boost Mobile, a Sprint subsidiary that has gained traction by targeting young, data-hungry users with prepaid services. The rumored merger would result in a carrier with 78 million-plus customers, rivaling both Verizon Wireless (s VZ) and AT&T (s T).
But the move would also prove a logistical nightmare, requiring the integration of T-Mobile’s GSM network with Sprint’s CDMA and iDEN infrastructures — all of which are incompatible. And the deal might have a tough time gaining approval of U.S. regulators at a time when the FCC seems increasingly eager to promote competition in mobile.
Both Deutsche Telekom and Comcast have long been rumored to be mulling an acquisition of Sprint. But if Comcast is going to finally step up and pursue a quadruple play, the time is now.