Google to buy Sprint?

Posted by jerry as Uncategorized

Google’s open wireless phone initiative has been discussed frequently, but apparently now there is rumor of Google wanting to buy Sprint.  Certainly it seems to make sense as a way to jumpstart things, but I see a couple of critical flaws that will almost certainly render this just a rumor:

• Sprint (S) has a market cap of about $46B USD.  Google has about $18B USD of assets, and a market cap about over $200B USD.  Sprint would cost more that Google can afford.  Since Google is not in the business, there won’t be synergies similar to other telecom rollups.
• Financing of what would likely by a $50B deal will be very hard to come by in the post apocolyptic credit market. 
• Organizationally, Google and Sprint would tear each other apart, if combined.  The old telecom culture of Sprint would likely be untenable in Google’s fast paced world.
• The bits that I’ve read about what Google wants to do with their phone service leave me wondering if owning Sprint really buys them anything.  If all of the infrastructure needs to be replaced to support some fundamentally new technology that costs say $20B to implement, why would you first spent $50B on a phone company then immediately dump $20B more into gutting and replacing it’s infrastructure. 

So, to me at least, this doesn’t add up.  Given that the stock market is in the toilet, I suspect that if Google did announce such a deal, it would be a boost to the overall market, but I suspect that Google would suffer a beating on Wall Street if they did.  In fact, I would expect rumors of the acquisition to have a negative impact too.

Bad deal.  Buy a start up with the tech you want.  Hire away the talent needed from ATT, Sprint, etc.  Just don’t buy a dinosaur.