At this point last year, it appeared as though the second-largest wireless carrier in the U.S. would soon become first by a wide margin. In early 2011 AT&T agreed to acquire T-Mobile USA. By combining the second- and fourth-largest carriers, AT&T would lay claim to the most subscribers in the country. But, more importantly, it would gain control of even largest swaths of spectrum. With a general shortage of spectrum and few ways of acquiring new bands, this acquisition carried heavy implications for the U.S. wireless industry. Less than a year later, the entire thing fell apart. Regulators had jumped into the fray, and they didn’t like what they saw. They didn’t like the decreased competition. They didn’t like the consolidation of spectrum. They didn’t even like the multiple plans AT&T submitted to divest in certain areas where they’d have a near monopoly. And so we were left at the same point as we were before the proposed acquisition. Unfortunately for T-Mobile, even with the $3 billion breakup fee it received from AT&T, its future looks dim. Nearly all of that $3 billion will help it play catch-up in rolling out an LTE network, and even that won’t come until 2013. That’s because T-Mobile’s spectrum holdings are not great enough for a rollout along the lines of Verizon. Because Verizon had surplus spectrum, they were able to work behind the scenes to build their LTE network, flipping it on without disrupting other services. T-Mobile, in other words, is far behind. And as they can learn from a competitor, playing catch-up is no easy task. Five years ago, Sprint found itself in a similar position. They were hemorrhaging customers and money. They had switched CEOs, but even then their corporate DNA needed a complete overhaul. While Sprint did make a comeback of sorts, they’re still not out of the woods. In fact, given their position, vastly inferior to those of Verizon and AT&T, they might never fully recover. T-Mobile, it appears, will be in a similar position. Without significant outside help, will they be able to keep up. T-Mobile and Sprint share further similarities as well. For instance, when Sprint was down it put an emphasis on prepaid services. They have no Sprint prepaid brand, but they do own Boost Mobile, which they propped up in early 2008 with a $50 unlimited talk, text, and data plan. The next year they acquired Virgin Mobile, creating a two-armed prepaid monster that captures a significant portion of the market. Those entities helped Sprint grow even as postpaid shrank. Similarly, T-Mobile has seen gains in prepaid amid postpaid losses for the past two years. In fact, prepaid might be T-Mobile’s only remaining strength. But is prepaid enough for T-Mobile to survive? While there is a quality selection of T-Mobile Android phones, the network still lacks the ever-popular iPhone. Their plans are popular enough, as evidenced by the influx of prepaid customers. But can they turn a profit on prepaid, which brings no guaranteed income? It’s a tough equation, especially for the fourth largest carrier in America. It’s difficult to see them thriving based on prepaid, given the strong competition out there. Chances are, they’ll need outside help. While a merger with AT&T seems out of the question, other merger options could become a greater option in the near future. With nearly every carrier moving over to LTE, we’ll see greater compatibility among cellular networks. That could even open up an avenue for a Sprint merger with T-Mobile. This has been proposed in the past, but it seemed unfeasible given that T-Mobile is a GSM network and Sprint is CDMA. Sprint had already experienced compatibility issues with Nextel’s iDEN network, so another technology acquisition didn’t seem prudent. But if both are running LTE networks, the transition could be easier. A merger between the third and fourth largest carriers might have a better chance of gaining regulatory approval than a merger between the second and fourth. Still more opportunities could arise from smaller regional carriers. Both Cricket and MetroPCS own formidable swaths of spectrum, and both either have upgraded or plan to upgrade to LTE. Sprint could eventually acquire one, with T-Mobile acquiring the other. That would solidify their positions and give them an influx of new customers. Of course, since both Cricket and MetroPCS are prepaid services, that might make for some trouble with Sprint, which works mostly on postpaid. But there is a clear opportunity for the prepaid-heavy T-Mobile. Given the great power that AT&T and Verizon hold, there seems little chance that T-Mobile, with under 30 million subscribers, can survive on its own long-term. They seem to understand that; in the past few years we’ve heard them having plenty of interest in being acquired. Perhaps that opportunity will come with Sprint, or perhaps they can acquire a smaller carrier to fortify its position. In either case, T-Mobile will need help in one form or another. There just doesn’t seem to be a way for them to survive by their lonesome.