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Verizon Vodafone Deal, Don't Get Too Excited

Whether T-Mobile and Sprint can win back customers from Verizon and AT&T through discounted iPhones and cheaply priced smartphone data plans in the wake of consolidation is a far more interesting story.

Sprint, for instance, saw its quarterly losses narrow more than analyst forecasts in first quarter earnings because a greater-than-forecast number of subscribers left the telecom in favor of service offerings from competitors. T-Mobile also has seen relentless U.S. market share losses, in recent years.

Sprint's prospective recapitalization in a merger with SoftBank could help the company complete a multi-billion 4G network expansion that finally could encourage subscribers to leave AT&T or Verizon. Meanwhile, a $25.5 billion proposal put forward by Dish Network could give Sprint billions in wireless spectrum assets and an innovative bundled offering of wireless, broadband and TV offerings.

T-Mobile recently launched an "anti-carrier" strategy to offer iPhone wireless plans without contracts that may ultimately save consumers up to $1000 from the two-year plans offered by Verizon and AT&T. Its solid network will also benefit from MetroPCS's spectrum and customer base.

There are also risks Verizon overpays for full control of Verizon Wireless, or that it will cut a deal just as wireless margins peak.

Bottom Line: While Vodafone's Verizon Wireless stake may fetch a record price tag, hedge fund investors are playing smaller consolidation among the industry's struggling third and fourth leading wireless players.

-- Written by Antoine Gara in New York.

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