Sprint News Causes Scrutiny of Management

By David R. Gallay, adjunct professor, Economics of Technology Management

An interesting article in the August 6 Wall Street Journal about Sprint Corporation addresses a number of key elements of technology management: corporate governance, strategy, and the market’s initial reaction.

WSJ opines that Sprint will no longer seek to acquire T-Mobile, based on a rather innocuous statement by Sprint Board Chairman Masayoshi Son: “While we continue to believe industry consolidation will enhance competitiveness and benefit customers, our focus moving forward will be on making Sprint a successful carrier.”

Initially, the market reacted negatively; by noon on August 6, both stocks lost more than 15 percent in value!

WSJ surmises that “stiff opposition from regulators” may have been the prime motivation underlying Sprint’s decision.  That’s plausible, given that a merged Sprint and T-Mobile would have created a firm with market value greater than either Verizon or AT&T.  The WSJ article offers another nugget that might have also prompted Board members to shy away from the merger: Sprint has yet to turn a profit since its 2007 acquisition of Nextel.

In hindsight, I have to wonder why the Board permitted the CEO (now the former CEO since the WSJ article also names his replacement) to even pursue a merger with T-Mobile in the first place. The regulators’ knee-jerk negative reaction to a mega-merger should have been anticipated. Moreover, Sprint’s last merger hasn’t worked out particularly well.  So what was the strategic rationale the former CEO gave to the Board for pursuing T-Mobile?  I don’t know. However, I think we’ll find out what it was in the next few months, as the finger-pointing and recriminations begin to leak out to the media.

About Mary Crowson

Mary Crowson is a program operations specialist for the Research Partnerships and Grants Initiative within George Mason's School of Business.

View all posts by Mary Crowson

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