Forget MetroPCS, Just Buy Sprint

$S $PCS $T $VZ  I always love when the stock market throws a good sale. Yesterday, it put a big sign on shares of Sprint Nextel that read "Today Only - 14% Off" after T-Mobile announced that it's snapping up rival MetroPCS.  If you'd listened to the pundits, you'd think that this is just another nail in the coffin for the troubled Sprint, which itself tried to acquire PCS last year, albeit at much higher prices. But that's simply not the case, as Sprint can do just fine with or without PCS in its stable.

The fact of the matter is that after years of struggling to combine its Sprint and Nextel networks and losing big on its bet supporting WiMax, Sprint finally got religion under CEO Dan Hesse and has been executing what can only be called a miraculous turnaround, one which has sent shares of Sprint up 114% for the year, even after yesterday's 14% haircut. 

Sprint has made the tough call to both cut its loses with Wimax and shutter its expensive Nextel network and go all-in on LTE, an advanced, high-speed network to rival both AT&T and Verizon's latest efforts. The company also paid through the nose to obtain the iPhone, a move which pundits also panned, but one that's already bearing fruit. Let's face it, you're not a real wireless carrier if you don't have the iPhone.

Hesse has also been vigilant on improving customer service to stem the tide of fleeing customers as well as cleaning up the company's balance sheet by reducing debt at a very commendable rate. Over the next 12 to 34 months, you will see Sprint emerge as a healthy, viable and respected number three player in the U.S. wireless market as its LTE and smart phone offerings at long last become on par with AT&T and Verizon. The company already offers truly unlimited data plans, something that continues to lure customers to its offerings.

So where does that leave T-Mobile?  After their failed merger with AT&T, T-Mobile now finds itself in a similar spot to where Sprint was just two years ago. They're a tiny fish in a big pond, they lack the iPhone and they don't have the spectrum needed to seriously roll out a next-generation network. Thus the move to acquire MetroPCS at these depressed levels makes perfect sense, as it gives T-Mobile a larger subscriber base and the spectrum it needs to crawl into fourth place behind Sprint.

But does Sprint need PCS in order to survive? No, they don't. Sprint's LTE roll-out will proceed just fine without extra spectrum from PCS or another merger. Does a bigger T-Mobile represent a competitive threat to Sprint? No, not really. Without an LTE network, the new T-Mobile is at best  two years behind where Sprint already finds itself in its evolution. 

Sprint will clearly never be a major threat to either AT&T or Verizon, but in the scramble to become a thriving alternative, I think it's clear that if Sprint continues to execute on its plan and clean up its debt, the company can easily achieve its goals.

I wouldn't rule out the possibility that Sprint still makes a bid for MetroPCS, since more spectrum is always a good thing and shares of PCS are worth a lot less this time around, but either way, Sprint comes out a winner.