T-Mobile’s customer base is about 35 million. Sprint’s is 50 million. AT&T and Verizon (NYSE: VZ) have about double the Sprint count. AT&T Wireless and Verizon Wireless have rich parents, each of which can draw money from their dwindling but profitable landline businesses, as well as wireless subscriber units that also have high margins. Each can afford to pay for aggressive infrastructure expansion of 4G ultrafast wireless networks. Each easily can afford to pay Apple (NASDAQ: AAPL), the most important chess piece in market share battles, the subsidies it demands for the iPhone.

T-Mobile has just announced it will cut 900 positions. The cuts will continue. DT is not likely to want to support a business that it must already know has no future.

Sprint and T-Mobile are faced with the difficult reality that each is too small and has no ready chance to grow. The technologies of the two companies are not entirely, or even partially, compatible. This makes a merger between them unlikely. Either could marry with smaller MetroPCS (NYSE: PCS). Sprint was close to such a deal, which would have cost $8 billion, but its board of directors rejected the plan as too risky and expensive.

There will be no foreign buyers for Sprint or T-Mobile, although several huge telecom companies in Europe and Asia could afford to make offers. They have watched Deutsche Telekom, one of the world’s largest carriers, struggle to keep T-Mobile afloat without any success.

T-Mobile’s presence in the United States probably will continue for years, as it becomes orphaned by its parent and slips inexorably toward ever greater loses.

Douglas A. McIntyre

T-Mobile may be the current merger flavor of the day, but this is the wrong effort or at least the wrong focus.  Sprint Nextel Corporation (NYSE: S) was the most recent potential acquirer but CEO Dan Hesse was blocked by his board of directors over fears that investors were already punished excessively and that the acquisition would put further pressure on its shares.  Sprint now owns Virgin in this overlapping field of prepaid and no-contract wireless and Sprint is still losing money.

The other would-be merger in the past was with Leap Wireless International Inc. (NASDAQ: LEAP).  With this company being the direct comparable outfit, it would make sense for these two companies to try to get past their differences and consider a stock-for-stock merger again.  While it will generate less for shareholders today versus the past, it would still allow for upside if the combined efforts generate higher earnings.

AT&T Inc. (NYSE: T) recently botched the T-Mobile buyout and T-Mobile does now have a few billion more in cash to spend.  Could that make T-Mobile a true buyer?  Anything is possible.  What T-Mobile does not have going for it is a stock in the U.S. that would allow it to do a stock transaction.

Leap Wireless is worth only $456 million and MetroPCS has a market value of $2.7 billion.  Both shares surged on Wednesday and both shares are down severely from their 52-week lows.  Perhaps these companies should swallow some pride and join their millions of customers together rather than hoping that one of the larger U.S. carriers will hope to grow with a reach-down effort into no-contract and prepaid wireless.  If the companies merge in a stock for stock transaction the action will still allow the holders who are long and wrong to recoup their losses if these two companies can get their earnings higher again.

Deutsche Telekom has reportedly issued the “no comment” but we would not have expected anything different in the current climate.

JON C. OGG

Cisco Systems (NASDAQ: CSCO) warns about the economy as it releases earnings. (Reuters)

Regulators may make mortgage lenders charge a flat fee to help home buyers. (WSJ)

Pfizer (NYSE: PFE) will give less marketing support to Lipitor as it moves to a generic form. (WSJ)

The Post Office backs away from a plan to close 3,700 rural offices. (WSJ)

Fannie Mae posts its best results since its bailout and made $2.7 billion. (WSJ)

The European Union delays a bailout payment to Greece as political turmoil there rises. (WSJ)

Spain may get a break on budget deficits from EU partners, who will give it more leeway to recover. (WSJ)

Weak imports raise China’s April trade deficit. (WSJ)

Chrysler will try to improve its battered quality reputation. (WSJ)

Liberty Media (NASDAQ: LMCA) increases its share of Sirius XM Radio (NASDAQ: SIRI) as it tries to gain control. (WSJ)

New Facebook government documents show it is weak in mobile ads. (WSJ)

Corporate borrowing makes the debt crisis in Spain worse. (NYT)

Third Point insists that Yahoo! (NASDAQ: YHOO) name an interim CEO. (NYT)

News Corp. (NASDAQ: NWS) doubles its share buyback to $10 billion. (FT)

MetroPCS (NYSE: PCS) may tie up with T-Mobile. (FT)

Sony predicts a profit this year. (Bloomberg)

Douglas A. McIntyre

T-Mobile USA is the fourth largest wireless carrier in the country, trailing Sprint Nextel Corp. (NYSE: S), AT&T Inc. (NYSE: T), and Verizon Wireless, a joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD). T-Mobile’s failed $39 billion merger with AT&T left the carrier with a couple of big problems: fleeing customers and no answer to either AT&T’s or Verizon Wireless’ rollout of their 4G networks.

T-Mobile’s 33 million customers are not enough to threaten either Verizon Wireless or AT&T and neither MetroPCS nor Leap would do a lot to change that. Each has fewer than 10 million subscribers. Sprint, with 56 million customers of which about 60% are lower-margin pre-paid customers, could tie up with either MetroPCS or Leap, both of which claim pre-paid subscribers as a majority of their customers. But neither T-Mobile nor Sprint could swallow the other, which is the only combination that could threaten Verizon Wireless or AT&T.

A merger between T-Mobile and MetroPCS would not really solve either of T-Mobile’s biggest problems. The largest benefit would be the addition of a lot of pre-paid customers, which could put a lot of pressure on Leap and the other pre-paid providers. But as a counterweight to the two big players, this deal doesn’t offer much.

MetroPCS’s shares are up 20.4% at $7.90, after posting a new 52-week low of $6.32 earlier this morning. The prior range was $6.38-$18.79. Leap Wireless’ shares are also up 20.4% at $6.19 in a 52-week range of $4.68-$17.66.

Paul Ausick

Verizon Wireless, a joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD), wanted the additional spectrum to accommodate future growth. That was no particular show-stopper as other wireless companies have been allowed to accumulate spectrum against prospective future needs. SpectrumCo, jointly owned by Comcast Corp. (NASDAQ: CMCSA) and Time Warner Inc. (NYSE: TWX) among others, and Verizon Wireless had also agreed to a cross-licensing deal where the two cable providers would be able to bundle Verizon Wireless’ service and the wireless carrier would be able to sell the cable companies’ content in a bundle.

Smaller rival wireless providers like MetroPCS Communications Inc. (NYSE: PCS), Sprint Nextel Corp. (NYSE: S), Deutsche Telekom AG’s (OTC: DTEGY.PK) T-Mobile USA division, and Leap Wireless International Inc. (NASDAQ: LEAP) complained about the hoarding of spectrum. As a result, the Federal Communications Commission (FCC) is considering requiring Verizon Wireless to divest some of its current spectrum before the deal is approved. A report at Bloomberg News cites “people familiar with the matter” for the information.

The FCC and the US Department of Justice, which must also approve the deal, want to maintain competition in the wireless and cable markets to protect consumer choice and prevent monopolistic pricing. But depending on how much spectrum Verizon Wireless must shed, there may be only one potential buyer — big rival AT&T Inc. (NYSE: T), which has stayed out of the fray so far, probably because it has equally big plans now that its $39 billion deal for T-Mobile has been killed.

The cross-licensing deals are also being investigated by the DoJ to determine if they threaten competition. The threat to competition and monopolistic pricing for consumers may be greater here than in the actual spectrum purchase. The nationwide reach of wireless networks and consumer demand for mobile resources opens up a whole new profit potential for Comcast and Time Warner. At the same time Verizon gets to offer programming that makes the company’s network a more attractive option, particularly if it can undercut competitive pricing.

The nuts and bolts of this acquisition and its fallout are nearly impossibly arcane. But the government’s decision will touch nearly everyone in the US. And that’s why the deal is so important.

Paul Ausick

We get more evidence of the switchover today from Charter Communications Inc. (NASDAQ: CHTR), which reported results this morning including miss on an already awful estimated EPS loss of -$0.57. Charter’s EPS loss came in at -$0.95. The company added a scant 20,000 customers for video in the first quarter compared with 141,000 new customers for Internet service.

As we noted last week in our look at earnings from Comcast Corp. (NASDAQ: CMCSA), bundling of services and content is becoming the new way of doing business in the space once dominated by cable providers. For example, Time Warner Cable Inc. (NYSE: TWC) and Comcast both have long-term deals with Walt Disney Co. (NYSE: DIS) to offer WatchESPN, the online and mobile version of Disney’s ESPN network. The cable providers are hoping that the offer of free mobile content will stem the flow of unsubscribers.

Verizon Communications Inc. (NYSE: V) and AT&T Inc. (NYSE: T) also offer high-speed digital content and are working on deals to offer new bundles to customers. Verizon’s attempt to acquire more wireless spectrum in its $3.6 billion deal for SpectrumCo gives the company’s wireless carrier, Verizon Wireless, the opportunity to bundle programming from Comcast and Time Warner Cable along with access to mobile broadband.

The cable providers, in turn, are able to offer a bundle to their customers that now includes Verizon’s high-speed mobile broadband. It should be no surprise that smaller carriers like MetroPCS Communications Inc. (NYSE: PCS), Leap Wireless International Inc. (NASDAQ: LEAP), and Frontier Communications Corp. (NASDAQ: FTR) are struggling.

Research firm Convergence Consulting recently released studies on broadcast and cable TV and bundling. Between 2000 and 2009, cable TV subscriber additions averaged 2 million a year. In 2010 additions totaled 272,000 and in 2011 additions totaled just 112,000. The firm estimates that 2.65 million cable subscribers “cut the cord” between 2008 and 2011, choosing instead to rely on “over-the-top” services from Netflix Inc. (NASDAQ: NFLX) and others. By the end of this year, the firm estimates there will be 3.58 million cord cutters.

Convergence Consulting estimates that the audience for free online/mobile viewing has plateaued at 19% of all TV viewing. But that seems low, especially in light of the cross-licensing deals between the wireless carriers and the content providers like Disney and the cable networks.

The other thing that could raise that plateau is another technological wonder from Cupertino. Rumors of an “insanely great” Internet TV box from Apple Inc. (NASDAQ: AAPL) have been rampant for months, if not years. There are already several options available for these ‘over-the-top’ boxes, but if Apple were to come up with a killer piece of hardware, the ground could shift in a hurry.

Of course the TV and movie industries have learned from the music industry that Apple drives a hard bargain, and they can’t let themselves give up currently large broadcast revenues in exchange for much smaller online sales. What Apple should hope for is that a game-changing device with one or two significant content partners will convince consumers to force the rest of the media moguls to toe the line.

The transition from wired high-speed broadband connections to wireless connections is just starting. There are lots of different companies involved and the one or two with the deepest pockets or that are able to discern what the future holds will prosper. As for the rest, who knows?

Paul Ausick

What’s killing shares today is the same thing that drubbed MetroPCS Communications Inc. (NYSE: PCS) and Leap Wireless International Inc. (NASDAQ: LEAP): subscriber growth is either weak or non-existent. Verizon Wireless, the joint venture between Verizon Communications Inc. (NYSE: VZ) and Vodafone Group plc (NASDAQ: VOD) and AT&T Inc,. (NYSE: T) are adding subscribers, especially to wireless offerings, but even they are not growing as fast as before. Sprint Nextel Corp. (NYSE: S) and T-Mobile USA, a division of Deutsche Telekom AG (OTC: DTEGY) face the same problems.

It’s worse for the smaller guys, though, because they either cannot offer the hottest products, like the iPhone from Apple Inc. (NASDAQ: AAPL) or because they’re stuck with a lot of legacy wireline business that is continuing to erode. CenturyLink Inc. (NYSE: CTL), which reports earnings on Wednesday, is expected to post EPS of $0.58, down more than -22% from the same period last year and down about -6.5% sequentially. CenturyLink, though much larger than Frontier or the others, owns a lot of wireline business.

Frontier’s residential subscriber number dropped from 3.34 million in the first quarter of last year to 3.04 million this year. Wireline revenue was also down, from $589 million to $535 million. Business services revenues also fell, from $591 million to $585 million, and the number of business subscribers also fell, from about 333,400 to 302,100. The number of broadband subscribers rose, as did the number of video subscribers. Consequently the revenue figures per customer rose as well. Just not very much.

Growth prospects for Frontier and the other small players are quite dim as they are spectrum-limited and face stiff competition from the big players. Worse, perhaps, is that there is not likely to be any competition among the big players to pick up these smaller competitors. If anything, Verizon and AT&T would prefer to abandon their dwindling wireline businesses. But CenturyLink is still absorbing its acquisition of Qwest and none of the others can — or probably should — to add to their wireline holdings.

Frontier’s shares are down about -58% just after noon today, at $3.67 after posting a new 52-week low of $3.49 earlier today. The prior range was $3.81-$8.97.

Paul Ausick

James H. Hance, Jr., Sprint’s chairman, is as much to blame for the company’s problems as Hesse. He has been on the board since 2005. That means he helped pick Hesse. It also means he has been part of all board discussions about how Sprint might turnaround its loss of market share to AT&T (NYSE: T) and Verizon Wireless. Hance was also a critical player in the board’s decision to block an $8 billion deal to merge with MetroPCS (NYSE: PCS), which Hesse has championed.

Hance is poorly qualified to lead the Sprint board. He is what many corporate governance experts call a “serial board member.” He sits on the boards of directors of Cousins Properties (NYSE: CUZ), Morgan Stanley (NYSE: MS), Ford Motor (NYSE: F) and Duke Energy (NYSE: DUK). Shares in Duke are up 15% over the last year, but those in Morgan Stanley are off 35% and Ford shares are down 30%. Shares in Cousins are off 10% during that period. And Sprint’s shares are 55% lower over the same period, as well as off by nearly 90% since Hance joined the board.

Hance ought to have his hands full with Sprint. The balance of his board work can only be a distraction.

Sprint has not been a viable standalone company for many years. The board should have played the most significant part in remedying that. Sprint has needed a marriage or sale for some time. Hance clearly has not provided leadership as Sprint tries to get a reasonable return to shareholders via the few means available.

Hesse is in the headlines every time Sprint’s fortunes falter. Hance should be there, too.

Douglas A. McIntyre

The company filed an 8-K after the close of trading Friday.  Hesse noted that the company has received feedback from some shareholders relating to the discretionary adjustment the Compensation Committee made under the incentive plan payouts for the impact of the iPhone on its financial results.

Hesse noted in the filing, “I do not want, nor does our Compensation Committee want, to penalize Sprint employees for the company’s investment with Apple, so I will forego this adjustment to my compensation. I have also voluntarily decided to take some additional actions regarding my personal compensation, and the Compensation Committee has agreed. I’m hopeful that these actions will allow the company to remain focused on delivering the best overall customer experience in the wireless industry, which is what will serve the company best in the long run.”

There is a lot more to this story if you look past the raw terms of the cuts.  Here are some of the actions being taken on Hesse’s compensation:

• Salary cut on a pro-rata basis over his remaining paychecks in 2012 to repay the $239,760 associated with the discretionary adjustment he received in February under the 2011 Short-Term Incentive Plan.
• Salary cut on a pro-rata basis over his remaining paychecks in 2012 to repay the $106,463 associated with the discretionary adjustment he received in February related to the performance units under the 2009 Long-Term Incentive Plan.
• Forfeits any right to a payment of $250,500 associated with the discretionary adjustment earned with respect to the 2011 performance period for the performance units under the 2010 Long-Term Incentive Plan. Subject to the satisfaction of applicable vesting conditions, this payment would otherwise be payable to Hesse in 2013 under the terms of the plan.
• Forfeit any right to payment of $294,107 associated with the discretionary adjustment earned with respect to the 2011 performance period for the performance units under the 2011 Long-Term Incentive Plan. Subject to the satisfaction of applicable vesting conditions, this payment would otherwise be payable to Hesse in 2014 under the terms of the plan.
• Reduce, from 200% of Hesse’s annual base salary ($2.4 million) to 170% ($2.04 million), his target opportunity under the 2012 Short-Term Incentive Compensation Plan.
• Forfeit two million performance units (valued at $2 million) granted to Hesse on February 22, 2012 under the 2012 Long-Term Incentive Compensation Plan.

Again, this feels like one of those situations where there is just a lot more to the story than meets the eye.

Hesse went on to say, “These voluntary actions regarding my personal compensation, which total $3,250,830, will eliminate any benefit for me to the discretionary adjustment the Compensation Committee made earlier this year, and will set my 2012 incentive compensation target opportunities at my 2010 levels.”

Hesse said this voluntary reduction of his future compensation does not constitute “Good Reason” under his amended and restated employment agreement dated December 31, 2008.  Hesse also agreed that if his employment terminates prior to completion of the salary reductions described in the first two bullet points above to a reduction of any amounts otherwise payable to him or his estate in an amount necessary for Sprint Nextel to “fully recover the indicated amounts, and to the extent insufficient to do so, to repay the remainder as soon as reasonably practicable.”

Doesn’t that sound a bit like a clawback of pay similar to what you have heard about for Wall Streeters during the financial crisis?

What is interesting here is that this starts out using the ‘investment’ with Apple over the iPhone.  It is not typical for a CEO to take a pay cut and to address dealings with an outside company as one of the first issues.  That is particularly the case in a hot product like the iPhone.

Another take here, and perhaps the most important take, is that Hesse is losing serious support from inside the company.  The way that the news reports went in February it looks like the board rejected Hesse’s efforts to acquire Dan Hesse, to purchase MetroPCS Communications, Inc. (NYSE: PCS) for the no-contract and ‘pay as you go’ cellphone service offering.  It is worth noting that MetroPCS shares hit another 52-week low on Friday and this one has been battered since earnings just over a week ago.

The question we are asking ourselves here is really about the timing of this filing.  By sneaking the news out on Friday after the close of trading, it sure seems like the company is hoping that other news will be more front and center besides a ‘voluntary’ pay cut.  The news may not be a stock-moving event on its own merit but this certainly feels like the second move from Sprint that would lead us to question just how long Dan Hesse has left as CEO of Sprint Nextel.

Sprint is burdened with debt of more than $20 billion at the end of 2011 and its share price of $2.36 compares to a $2.10 to $6.45 range of the last 52-weeks.  The $7.1 billion market capitalization of the common stock is only a small portion of the Sprint Nextel enterprise value.

Blocking a CEO-led acquisition and then sneaking in a filing late on a Friday showing a ‘voluntary’ pay cut for the CEO… Honestly, how much longer does Dan Hesse have as CEO?

JON C. OGG

Editor’s Note: 24/7 Wall St. has received new information regarding the allegations about Ubiquiti Networks Inc. (NASDAQ: UBNT) from representatives of the company related to a report from a Chinese website claiming a connection between the “Chinese mafia” and the company. The original report used for our article has been removed from the web site and is no longer available. The company has requested a retraction on this matter which we wish to address.

Ubiquiti issued the following release on Thursday morning:

Ubiquiti Networks, Inc. (Nasdaq: UBNT), a next-generation communications technology company reiterated with its customers the discovery of counterfeit products on the market and launched a worldwide campaign to aggressively defend its intellectual property and protect its customers.

The company believes that as a result of the effectiveness of its campaign, it has become subject to malicious and false accusations posted on overseas websites by those infringing on its intellectual property, and these false accusations have subsequently been reposted by unwary media outlets and news aggregators.

“While we do not normally comment on rumors, we take our business reputation very seriously and strive to conduct all of our activities in compliance with the law,” said Jessica Zhou, General Counsel and Vice President of Legal Affairs of the company, “Our worldwide intellectual property protection efforts demonstrate that we take our customers’ interest to heart and that we remain firmly committed to being a technology leader.”

24/7 Wall St. was contacted today by representatives of Ubiquiti Networks who pointed out this situation as false and damaging. We noted in our article that the basis for this nasty situation was a report out of China, which we can now see has been removed from that site. We also concluded in our original article, “Whether or not Ubiquiti has made its competitors an offer that can’t be refused will be proved or disproved at some point.”

This stock was already down over 16% at $29.31 when we published our story.  What is perhaps the most sad issue about this situation is that Ubiquity shares, despite the company defending itself in a press release, did not recover from the sell-off which took shares from $35.00 on Tuesday down to $28.90 on Wednesday and down another $0.12 on Thursday to $28.78. This is one of those unfortunate situations where what is true and what is false when it comes out of China is not exactly clear.

Ubiquiti Networks issued another press release after the close on Thursday noting that its CFO plans to present at the JMP Securities Research Conference on Monday, May 14, 2012.

Forbes has also issued an update to their original story.

-The 24/7 Wall St. Team

Our original article from 2:29 PM EST on May 2, 2012:

In the great scheme of things, wireless communications company Ubiquiti Networks Inc. (NASDAQ: UBNT) is pretty small, with a market cap of around $3 billion before today’s debacle. That puts the company in the same league as MetroPCS Communications Inc. (NYSE: PCS) and United States Cellular Corp. (NYSE: USM), although Ubiquiti does not operate as a carrier but as an equipment maker.

A report at a Chinese website claims that Ubiquiti’s CEO is under investigation for allegations of sending “[C]hinese mafia to [competitors’] factories to intimidate and harass and threatening them to stop trying to produce technology that are competition to [Ubiquiti].”

The report continues:

Using mafia to solve commercial dispute, collect due payments is a common patter with Chinese small size companies. However, it is very unusual for a public listed American company to use this kind of method to stop the competition. If these accusations are proven right it could be a very serious problem for this young company and its CEO. … The company has faced legal trademark problems in many countries, as they did not register their trademark in most of the countries worldwide. The lack of respect for international laws and the fact that their sold products to countries under trade sanctions such as Iran brought them many legal problem before.

You can’t make this stuff up.

Oh, and by the way, Ubiquiti reported better-than-expected EPS and revenues yesterday, and forecast the next quarter in-line with expectations. But who cares — we’re talking about the Chinese mafia here.

Whether or not Ubiquiti has made its competitors an offer that can’t be refused will be proved or disproved at some point. But shares are taking a beating today, down more than -16% at $29.31 in a 52-week range of $16.25-$35.99.

Paul Ausick

A Google cache of the original story appears here.