Rumors surrounding a possible merger of Sprint and T-Mobile have been swirling for a few years, but now that merger looks to be coming a reality.
In April 2018, T-Mobile CEO John Legere announced via Twitter of the plans for the two wireless providers to join forces.
T-Mobile is the third largest cellular provider behind Verizon and AT&T, with Sprint coming in fourth. While T-Mobile has seen vast improvements to their networks and customer base over the last few years, Sprint has failed to break out.
This merger will combine the two companies’ customer bases and bring that total to approximately 126 million subscribers. This brings them in line with AT&T’s 141 million and Verizon’s 150 million. While the companies by themselves struggled to compete with the big two carriers, the combined company has the resources and user base to go toe-to-toe and be a strong third player in the wireless game.
Also, analysts say the merger could speed up the deployment of 5G wireless technology, which is designed for blazing fast speeds, deeper penetration into buildings, and more robust connections. Separate, this deployment would be costly and complicated but becomes easier thanks to the merger.
While the Justice Department will look at the proposed merger and may decide to block it, the combined company benefits Sprint customers in the short term more than T-Mobile’s customers. Sprint signed a deal with T-Mobile that allows their customers to connect to T-Mobile’s network when they’re roaming provided they have a phone capable of connecting to T-Mobile’s GSM network. The deal is valid for four years even in the event the merger is blocked.
Provided the deal goes through, the new company (which is rumored to be still named T-Mobile) is set to combine the two networks into one. Right now, the companies operate different technologies for their networks, CDMA for Sprint and GSM for T-Mobile. Having one network to upkeep saves money for the company, however, once completed, customers with CDMA-only phones will have to upgrade.
Another advantage for customers will be greater coverage and faster data speeds. Lastly, as mentioned, the merger will allow the new company to more quickly deploy their 5G network, which will benefit all T-Mobile subscribers.
While most of that sounds good for consumers, some customer advocate groups are concerned the merger will have a negative impact on the market. The thought is that with only three major carriers there won’t be enough incentive for any of them to compete as vigorously as they would with more companies in the mix; this means fewer options for consumers when it comes to prices.
Since the merger hasn’t been approved yet, prices are an unknown. Sprint CEO Marcelo Claure and T-Mobile’s John Legere are saying prices won’t go up in the short term as they want to compete with AT&T and Verizon. However, some speculate that rates will be lowered once the deal goes through in the hopes of stealing customers away from the big two.
Even if prices do fall, it will more than likely be short-lived as the deployment of 5G is costly and the lack of competition generally means higher rates for customers. One need only look towards Canada with only three major cell carriers to see this action. It’s said that Canada’s cell phone bills are some of the highest in the world.
As mentioned, both T-Mobile and Sprint’s subscribers will benefit from the merger when it comes to service; however, Sprint’s subscribers will benefit more because Sprint’s current coverage area is spottier than the other three carriers despite them making improvements. Also, data speeds on Sprint’s network often fail to match those getting on the other three carriers. The merger with T-Mobile gives the company a more comprehensive coverage area, and better penetration into rural areas, which has been typically Verizon’s domain. Also, Sprint customers will benefit from a stronger, faster, and more reliable LTE signal.
Should the company be successful in 5G deployment, customers can expect speeds of up to 15 times faster than what they’re getting on current LTE networks. In addition to customers who are considering switching mobile providers, businesses will more than likely be doing the same. For businesses, this might require hiring a telecommunications consulting firm to ensure that nothing gets mixed up or missed in the process.
The most significant case made for the merger is the aforementioned 5G network. Experts say the U.S. lags behind countries like China when it comes to wireless network speeds and that it’s time for America to catch up.
Both Sprint and T-Mobile make the case that separate, neither company can successfully deploy the next generation of wireless technology, but only by coming together can they advance the network.
Another case in favor of the merger is that, when combined, T-Mobile can better compete with Verizon and AT&T because as separate entities, neither one is a serious threat. And, if 5G is indeed the future of the wireless network, Sprint and T-Mobile as independent companies probably couldn’t compete with Verizon and AT&T when they deploy the advanced network.
The big case against the merger is, of course, lesser competition, which means less choice for consumers. A combined Sprint and T-Mobile is likely to be on par with AT&T and Verizon when it comes to pricing, whereas the two companies apart could be more aggressive with prices to lure customers away from other two carriers. In areas where all four are major players, customers enjoy having options and companies are more willing to compete when they know the guy across the street, and the guy up the block are vying for your business.
Experts say there’s a 50/50 chance the merger gets approval. In the meantime, Verizon CEO Lowell McAdam and AT&T CEO John Donovan have played down the news, and in McAdam’s case, he stated flat out “we don’t care” in an interview. He went on to say that in regards to 5G, Verizon is already “way ahead of everybody.”
If approved, the merger won’t likely be complete until 2024.