WASHINGTON (TheStreet) -- Despite U.S. regulators' concerns that AT&T ( T) and Verizon Communications ( VZ) could unfairly dominate the telecom industry, the federal government is likely to block an attempt by Sprint Nextel ( S) to acquire T-Mobile USA Inc., industry analysts predict.
The Wall Street Journal reported Friday that Sprint is considering a bid for T-Mobile. Several analysts said they believed Sprint leaked the story to test regulators' reception to a potential deal. The Department of Justice and the Federal Communications Commission both opposed AT&T's $39 billion plan to acquire T-Mobile in 2011. A Sprint takeover of T-Mobile, while potentially less anticompeitive than AT&T's, would have nonetheless raised serious concerns, analysts said Monday.
"Assuming it was Sprint that leaked the news, their intent seems to be a simple test of the waters," Craig Moffett, senior analyst at MoffettNathanson LLC wrote in a research report. "By piquing the discussion, they presumably hope to find out if a deal could or couldn't get done."
Christopher King and David Kaut of Stifel, Nicolaus & Co. predicted the reception in Washington "would be chilly, given recent pronouncements, particularly with major spectrum auctions on the horizon."
Noting that Sprint and T-Mobile are the No. 3 and No. 4 number carriers, respectively, in the U.S. wireless market after AT&T and Verizon, they said the DOJ's Antitrust Division is likely to challenge the deal in court.
That prediction is based in part on the DOJ's comments in a telecom industry proceeding at the FCC in which the agency said "the different arrays of choices" offered by each of four major carriers provides many dimensions of competition, including "coverage, network speed, network technologies, and price." As a result, the DOJ said it "believes it is essential to maintain vigilance against any lessening of the intensity of competitive market forces."