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T-Mobile could be broken up, analyst says

Even if the merger between AT&T and T-Mobile reaches a dead-end, the latter's assets could be split and sold to multiple parties, according to Mizuho Securities.

T-Mobile USA may look to split itself into pieces for multiple buyers if its deal with AT&T falls through.

That's according to Mizuho Securities analyst Michael Nelson, who said in a research note issued today that companies such as MetroPCS, Leap Wireless, and U.S. Cellular have significant interest in picking up new markets. T-Mobile could also break itself up into multiple parts as part of a divestiture plan that AT&T would work out with regulators to get approval for the deal.

"Our analysis indicates MetroPCS, Leap, and U.S. Cellular could have significant interest in acquiring markets where AT&T/T-Mobile have high market share concentration," Nelson said in his note.

Representatives from Leap, US Cellular, and T-Mobile weren't immediately available for comment. MetroPCS declined to comment.

Nelson's opinions speak to the dim view that many have of T-Mobile's prospects as an independent company. Many in the industry had expected AT&T, which boasts an army of influential lobbyists, to push through the necessary regulatory approvals for the deal. But the lawsuit filed last week by the Department of Justice to block the deal presents a huge hurdle.

"The deal is not dead but is much less likely," Nelson said.

T-Mobile parent Deutsche Telekom is apparently reluctant to stay in the U.S. market. The company is eager to use its cash to invest in other areas, and T-Mobile has been floundering over the past year and a half as it loses its most valuable contract subscribers to its larger national rivals and smaller, cheaper regional players. Despite a number of price cuts and promotions, the company hasn't been able to slow down the customer defection on the so-called post-paid side of the business.

But even if the AT&T deal doesn't pan out, Deutsche Telekom has other options for T-Mobile. Nelson said the German telecom giant could carve out markets and sell them to various carriers.

Nelson said he doesn't believe T-Mobile will partner with LightSquared or Clearwire for 4G service. While T-Mobile touts a 4G service now, it is really a souped-up version of 3G technology. As a standalone company, it could be left behind as Verizon, AT&T, and Sprint Nextel all race ahead with their own true 4G network roll-outs. In addition, Deutsche Telekom is less likely to invest capital in any 4G upgrade, he said.

In the short term, Nelson said he sees price competition ahead. T-Mobile is now more likely to cut prices and offer more attractive plans in an effort to regain market share. MetroPCS and Leap are thus most at risk because they also compete on price, while Sprint could also feel the pain. For consumers, it could mean better deals from a number of different carriers as each player attempts to stay competitive.