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Bidders lining up for Boost Mobile amid ongoing Sprint/T-Mobile deal review

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Bidders lining up for Boost Mobile amid ongoing Sprint/T-Mobile deal review

Interested buyers are already lining up for Sprint Corp.'s Boost Mobile prepaid business. But any deal for Boost hinges on the uncertain regulatory outlook for Sprint's larger planned deal with T-Mobile US Inc.

The CEOs of at least two smaller wireless players are already in talks about arranging separate offers for Boost, according to interviews with S&P Global Market Intelligence. In a bid to win approval for their proposed merger, Sprint and T-Mobile said they will divest the Boost prepaid business through a market-based process. The chairman of the U.S. Federal Communications Commission has already expressed his support for the plan, while the U.S. Department of Justice has publicly remained quiet. Both the FCC and the DOJ must approve the Sprint/T-Mobile transaction at the federal level before the deal can close.

Potential bidders

Q Link Wireless LLC, a prepaid wireless company based in Florida, had in previous years been in talks with Sprint about acquiring its Assurance and Virgin prepaid brands, but is now preparing to make an offer for Boost, Q Link founder and CEO Issa Asad said in an interview.

"We're ready for it. We were ready for it a few years ago when we were talking to them about the Virgin brand," Asad said.

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He emphasized that Q Link Wireless — which serves almost 2.5 million customers largely through the FCC's Lifeline fund, a program that subsidizes fixed or mobile voice service for low-income consumers — has several advantages over other potential bidders.

He pointed to the company's existing exclusive mobile virtual network operator agreement with Sprint. As part of their regulatory commitment around the planned divestiture of Boost, T-Mobile and Sprint have said they will offer the Boost buyer terms for a six-year wholesale MVNO agreement.

Asad also said Q Link is in a position to move quickly. "They have to make this deal happen by late July," the CEO said, referring to the July 29 expected closing date that T-Mobile and Sprint have set for their own larger transaction.

"The amount of people that can make this deal happen in that amount of time is really limited," Asad said.

Stephen Stokols, CEO of the mobile company FreedomPop, is also interested in Boost, saying in an interview that he is in talks with several private equity groups about arranging an offer.

Stokols said the company brings with it an "experienced management team with proven ability to drive growth" and that FreedomPop has a proven "track record of innovation and disruption" in terms of its pricing and service offerings.

Valuation

Alex Besen, founder and CEO of the mobile data consulting firm The Besen Group LLC, however, warned that a major question around any of these potential buyers is the price for Boost.

Stokols estimated a $1 billion to $2 billion valuation, assuming 8 million Boost subscribers. Sprint does not break out Boost subscriber metrics, but analysts have estimated the figure to range between 7 million and 8 million, while Besen pegged the figure as being at the upper end of that range, between 7.5 million and 8 million.

Asad said the ultimate price for Boost will likely be "closer to the $3 billion mark," but noted that the price tag depends on a number of factors, including the number of serious bidders.

Besen said he has seen valuation estimates as high as $5.5 billion for Boost "depending on who the bidder is."

Peter Adderton, the founder of Boost Mobile who sold the U.S. business to Nextel Communications Inc. in 2004, also confirmed in an on-air interview with CNBC that he is interested in Boost, though he said the valuation would depend on the terms of the planned MVNO agreement with the combined Sprint/T-Mobile and whether any spectrum was included.

He would like to see the divestiture of 60 MHz of Sprint's 2.5 GHz mid-band spectrum included as one of the regulatory conditions for the Sprint/T-Mobile transaction.

Cable's interest

Besen also believes a consortium of cable companies may be interested in bidding for Boost. Comcast Corp. and Charter Communications Inc. currently have existing MVNO agreements with Verizon Communications Inc. that underpin their respective wireless offerings, Xfinity Mobile and Spectrum Mobile, while Altice USA Inc. has an MVNO agreement with Sprint and plans to launch a mobile offering this summer.

Besen noted the economics of Comcast and Charter's MVNO agreements with Verizon are not in the cable companies' favor based on the wholesale rates they must pay.

"So if they do get Boost as a joint consortium, I think it might be attractive for them," Besen said.

T-Mobile and Sprint have promised regulators they will offer the Boost buyer wholesale rates that are meaningfully better than the current rates in the most favorable of T-Mobile and Sprint's three largest MVNO agreements.

A Comcast representative declined to comment on the matter, while a Charter representative did not respond.