Why Verizon should acquire Sprint (or at least try)

[Commentary] How could Verizon block AT&T's proposed acquisition of T-Mobile? “If Verizon really wanted to kill this deal, it would only have to say it was buying Sprint.”

The Federal Communications Commission and the Justice Department are leaning toward approving the merger of the AT&T and T-Mobile, a similar proposal from Verizon Wireless and Sprint would stop them in their tracks. The government may be willing to winnow the competitive market down to the three nationwide operators, but it would take a gigantic political and philosophical leap to justify only two.

The lynch pin to AT&T’s argument is that a combined AT&T and T-Mobile won't reduce competition; rather it puts the two operators in a position to compete more effectively. And AT&T’s key exhibit is none other than Sprint. Sprint not only would be a third Tier I operator to balance out the market, but, unlike T-Mobile, it runs a next-generation mobile broadband service, WiMAX, which is competitive with Verizon’s current and AT&T’s future long-term evolution (LTE) networks. AT&T can argue that in the grand scheme of things, taking T-Mobile out of the market would be a wash. It can't really make that argument if Sprint were removed also.
AT&T is also claiming that the mobile broadband space has seen increased competition lately as new entrants like Clearwire and LightSquared enter the market, each loaded up with new spectrum. Well, a Verizon-Sprint merger would cut those new entrants in half, given Sprint’s ownership stake in Clearwire. To make its application credible, Verizon might offer to divest Sprint’s Clearwire assets, but Sprint is Clearwire’s largest wholesale customer and investor. If Sprint were to cut and run, Clearwire might simply fail. LightSquared’s future also is far from assured.

So in this outlandish scenario, could regulators allow an AT&T-T-Mobile deal to pass, but deny a Verizon-Sprint tie-up?