The deal between T-Mobile and Sprint to merge their businesses in the wireless industry has finally been announced. Following a few years of many unsuccessful attempts, two of the nation’s largest carriers are committed to a merger. By bringing their businesses together, the expectation is that the wireless industry gains a stronger alternative to Verizon and AT&T.
T-Mobile and Sprint, however, are still far from actually becoming one. Both sides must now prove to U.S. regulators that the industry would remain full of competition.
Acknowledging the challenges in the path ahead wasn’t ignored by either company. The two sides are working to inform the public of benefits. Marcelo Claure, who’s been leading Sprint since 2014, even called up the Federal Communications Commission’s Ajit Pai immediately following the deal’s announcement. T-Mobile’s John Legere also joined him in appearing on CNBC and Cheddar.
Other employees, meanwhile, have been responding to consumers and members of the media on Twitter who are skeptical of the merger. It’s an all-out blitz to prevent the deal from falling apart before things get tricky in front of the government.
T-Mobile and Sprint have been on very different trajectories in recent years, but they’ve both needed to be infused with cash. The magenta-loving carrier launched a strenuous Un-carrier movement that quite frankly reshaped the wireless industry. On the other side, Sprint’s struggled to survive. Both need money for growth and thus merging makes sense for them.
For you, the merger might not be so beneficial. T-Mobile and Sprint can say whatever they’d like to ease our minds, but the truth is that the wireless industry is condensing if the deal gets approved. And that’s not good for consumers.
This merger isn’t between two small, regional companies. T-Mobile and Sprint rank third and fourth nationally. Competitors don’t overlook them. Putting together their businesses would give the new T-Mobile above 100 million subscribers. Much of that would be comprised of the old T-Mobile’s customers, but Sprint is still bringing over a hefty 40 million or so subscribers.
You need choice, and the combined company significantly hinders that. If you’re shopping for a nationwide, modern network that’s always advancing, you’ll be limited to just three carriers. Verizon and AT&T, the two longtime juggernauts, would be joined only by the new T-Mobile.
Regulators have long desired to maintain at least four competitors in this industry. When AT&T tried to purchase T-Mobile, the U.S. government issued a ruling that consumers would be harmed by lack of choice. The same happened when SoftBank tried acquiring T-Mobile outright in 2014. Now there might be little resistance to such a transaction.
Yet, even with a pro-business administration in the White House and Congress also leaning in a favorable direction, the same negatives still exist.
Better competition means better pricing. That’s what the new T-Mobile is pushing out of the gate. Legere, Claure, and everyone else going along for the ride is proclaiming that customers will get an industry-leading network at a cheaper price.
While I’d love to be wrong on this one, I highly doubt the new T-Mobile will deliver less expensive wireless service. You can’t possibly give us the world’s first nationwide 5G network with continued expansion for 4G LTE at a lower price. There’s also no chance investors would allow such a thing.
T-Mobile and Sprint say they need each other to win the 5G arms race. True, indeed. But in the process teasing lower prices is foolish. Have Verizon or AT&T lowered prices? No, and they’re incredibly diverse companies. With over 100 million subscribers each, the last thing a major carrier thinking about is affordability. Instead, it’s thinking about generating more money off you.
Investors want to see fatter margins on top of more revenue, so the new T-Mobile won’t decide to make access to its fast-growing network cheaper for the sake of generosity. In fact, the opposite is likely.
The new T-Mobile and its competitors are probably going to raise their prices since there are fewer carriers to choose from. Sound like collusion in the making? It sure does to me.
Over 350 million subscribers would belong to just three carriers in the event T-Mobile and Sprint pull this off. Consumers would be stuck if one raised its prices because the others would follow.
By the way, you’d have to assume it’d become more expensive for prepaid brands to lease network space anyway. The new T-Mobile, Verizon, and AT&T would set out to squeeze every last penny possible from you, me, and the prepaid brands. See, this potential merger affects so many parties.
The new T-Mobile, like Verizon and AT&T, is also spending billions of dollars on its network while investing in additional areas. T-Mobile, for example, is making a big bet on live TV streaming. Pair that risk with the billions of dollars spent on 5G and 4G LTE, and you should understand that lowering your monthly bill is the least of their priorities.
The Un-carrier strategy is fantastic, but it’s also costly. Deutsche Telekom, T-Mobile’s parent company, has had to lay out a ton of money to keep up. So it has been interested in a merger or sale to stop taking on the costs.
Post-merger, don’t be surprised if the aggressive tactics evaporate. T-Mobile wouldn’t need them. Adding Sprint’s group gives the long-wanted number of subscribers, and then it can pivot to a Verizon- and AT&T-like structure where value-driven promotions are few and far between.
We’ve loved T-Mobile for reshaping the wireless industry. But it was only motivated to do that because the company needed to attract newbies in large waves. The merger gives the new T-Mobile what it always wanted, and that should cause its disruptive style to vanish.
The defense you’ll hear frequently from T-Mobile and Sprint as this moves on is that competition comes from more than Verizon and AT&T.
What’s being ignored in that narrative is that many aren’t using spectrum nor do they have plans to. Comcast leases space on Verizon’s network, and the spectrum owned by Dish Network isn’t used for wireless service. Mind you, the number of subscribers a mobile virtual network operator (MVNO) has is minuscule compared to what the major U.S. carriers have. The disparity is laughable.
T-Mobile always knocked Verizon and AT&T. Now it’s on the verge of becoming just like them. The Un-carrier days are nearing an end, and then we’ll be back to being bullied around by carriers who don’t care about customers but merely our money.