So why would BT want to acquire a struggling U.S. wireless carrier? For one thing, though it operates as an MVNO selling BT-branded mobile services over the Vodafone network, BT has long been considered as in need of a mobile play to fund its future growth, as its core landline business plateaus. (Only a year ago there was speculation that Vodafone itself might acquire BT.) A trans-Atlantic play might actually make sense for the U.K. telco, which in July reported a 31% increase in first-quarter profits from the same period a year ago.
Second, Sprint and BT's businesses align in some intriguing ways. Both have staked their future not on voice calls but on broadband Internet connections, including significant investments in WiMax. BT was reported trialing WiMax networks in rural locales as far back as 2004, and Sprint has committed around $5 billion to building out a nationwide WiMax network in the next few years. BT added half-a-million customers to its broadband subscriber rolls in the most recent quarter, for a total of 11.2 million. And the relatively low penetration of broadband in the U.S. must be appealing to BT executives, who will face market saturation in the U.K. in coming years.
Sprint's debt-to-earnings ratio is relatively low, and its shares have been depressed for a year, making it a more attractive purchase for BT, which has a market cap of $51.1 billion.
The primary objection to a BT-Sprint combination is that Sprint, unlike European and U.K. carriers, uses CDMA cellular networking technology. Vodafone (and thus BT Mobile) operates over GSM networks. That barrier loses some some height, however, when you note that Sprint has begun releasing multi-band devices like the BlackBerry 8830, which has both CDMA and GSM capability built-in.
One more item of note: Wall Street, which often punishes the purported acquirer in such deal rumors, is not clobbering BT: the company's shares also climbed slightly today on the New York Stock Exchange.