Sprint Drops Its Bid to Purchase T-Mobile, Hires New CEO

Aug 06, 2014 06:30 PM EDT | Matt Mercuro

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Sprint has decided to drop its bid to purchase the No. 4 carrier in the U.S. T-Mobile after regulatory resistance showed no signs of softening despite months of persuasion, a source confirmed to Reuters.

Sprint shares dropped 19 percent to $5.90, meanwhile T-Mobile fell 10 percent to $30.38 earlier today (Aug. 6).

The move is a setback for Sprint's company SoftBank Corp., whose billionaire founder Masayoshi Son considered the deal important for taking on U.S. market leaders Verizon and AT&T.

Sprint, the No. 3 U.S. mobile carrier, and T-Mobile haven't ruled out consolidation in the future however, but decided the deal is "unlikely" to be approved at this time, sources said, according to Reuters.

U.S. regulators are determined to keep the number of major wireless carriers at four.

"We didn't think the opposition would be this strong," a SoftBank executive said, according to Reuters. "The environment will definitely change."

Sprint named Marcelo Claure, 43, as its chief executive this week, effective Aug. 11, to replace Dan Hesse, who has been CEO since 2007.

Claure is known for founding mobile phone distributor Brightstar Corp, which was acquired by SoftBank in 2013.

"Without the prospect of an M&A lifeboat, investors will start to care again about things like, oh ... valuation," MoffettNathanson analyst Craig Moffett wrote in a client note, according to Reuters. "Cash flow is likely to be negative or non-existent for years, and one cannot dismiss the possibility of having to turn to a capital raise to prop up its financial position."

Claure will earn a base salary of $1.5 million, with the potential to earn more than $24 million through performance-based awards and stock options.

T-Mobile has made headlines recently for its aggressive pricing plans and no-contract campaigns, which have helped increase customer numbers.

The company posted its first net profit in a year during the second quarter. 

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