Sprint Nextel Corporation is considering a merger that would combine its operations with its rival T-Mobile USA. The potential merger has hurdles that will mean a deal will not happen quickly.

If they two companies do merge, it would combine the third and fourth largest wireless carriers in the country. Sprint and T-Mobile have both struggled to hang on to customers that are drawn to AT&T and Verizon, the two biggest wireless carriers in the U.S.

Sprint needs more size, industry analysts say, to be able to compete for devices like the iPhone, which is carried by Verizon and AT&T.

Sprint could save a lot of money on marketing and overhead by merging with T-Mobile. They could use some savings; Sprint is currently in debt.

T-Mobile is the U.S. subsidiary of Deutsche Telekom AG, and it is falling behind in the next-generation-network-building race. Merging with Sprint could give Deutsche Telekom a boost in that race without a major investment. 

The reason the deal cannot be made quickly is that there is some disagreement about the value of T-Mobile, and some question about the ownership and leadership of the proposed combined company.

Sprint's position is that it would own more than half of the combined company, and it would decide who would run the newly merged business. Directors seem to be in favor of keeping Sprint's CEO Dan Hesse.

Deutsche Telekom might have some problems with being the minority shareholder of the merged companies.

San Diego mergers and acquisitions attorney remember that to break into the American market, Deutsche Telekom paid over thirty billion dollars in cash and stock to acquire VoiceStream Wireless in 2001. The company was then renamed T-Mobile USA.

Source: Wall Street Journal "Sprint in Talks Over T-Mobile USA" 3/8/2011