If Sprint buys T-Mobile, it may have to slash prices: analysts

If Sprint Corp acquires T-Mobile US, it could save up to $6.6 billion on network, equipment and operating costs, but it will have to slash its prices to match the target company's steep discounts, analysts said. Sprint, under Chairman Masayoshi Son, has been hesitant to join other carriers in cutting fees because a decline in revenue would hurt its stock price, analysts say.

Its shares have risen 8 percent since Dec. 12 on speculation it was looking to acquire T-Mobile from Deutsche Telecom AG.

"I think he's realized he's between a rock and a hard place. Sprint’s prices are much too high, but if Sprint cuts prices, its stock will fall," said Craig Moffett, lead analyst at MoffettNathanson. "They don't come close to justifying their stock price."

The price differential is just one hurdle that Sprint, which is 80 percent owned by Japan's SoftBank Corp, would face if it pursues a deal to buy T-Mobile.

Unease about whether Sprint can overcome regulatory hurdles sent its stock down 9.3 percent to $8.77 since details emerged of a potential bid. Sprint customers spend an average of $62 a month, compared with $50 for T-Mobile. "It is not a sustainable situation. If the companies merge, they will need uniform pricing across the company," said Michael McCormack, a lead analyst at Jefferies.