The combination would create a stronger player to compete against Verizon and AT&T and more effectively jump to 5G.
The years-long wireless industry twist on the will-they-won’t-they romantic comedy is finally reaching its climax. T-Mobile and Sprint finally — finally! — agreed to get together.
The $26 billion deal would combine the nation’s third and fourth largest wireless carriers, creating a larger player to better compete against industry leaders Verizon Wireless and AT&T. Under the deal, T-Mobile parent Deutsche Telekom will assume control of the two businesses, with Sprint parent SoftBank taking seats on the board of the new company, to be called simply T-Mobile.
T-Mobile CEO John Legere and his management team would take over day-to-day control of the combined business.
The merger marks the culmination of years of flirting between T-Mobile and Sprint, which nearly agreed to merger late last year before talks fell apart in November. As carriers have upped their game to win you over, tossing in everything from unlimited data plans to free Netflix and even a free year of service, the intense environment has the two carriers joining forces — and resources — to better compete.
Both companies have made their impact felt on the industry over the last few years. T-Mobile eliminated contracts and phone subsidies and last year led the push to bring unlimited plans back to the industry in a bigger way. Sprint introduced the concept of a phone-leasing plan and in 2017 began offering a year of its service for free.
No company in the wireless industry has been as effective at turning itself around as T-Mobile, which under firebrand Legere has routinely outstripped the rest of the players in subscriber growth. It’s no surprise he’s sticking around.
“This combination will create a fierce competitor with the network scale to deliver more for consumers and business in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could do on its own,” he said in a statement.
Throwing in more incentives to win over customers can’t last. Wall Street analysts and industry executives have long said that consolidation was inevitable in this industry. Many pointed to the combination of T-Mobile and Sprint as the most natural pairing.
The combination would mean a larger base of customers and, in turn, more revenue and resources to pour into future investments. At the end of last year, T-Mobile boasted 72.6 million customers while Sprint had 54.6 million connections.
In comparison, Verizon has 116.2 million connections as of the first quarter, while AT&T boasts 143.8 million, helped by its assets in Mexico.
Sprint and T-Mobile each have valuable spectrum that could theoretically be combined for superior nationwide coverage for customers, although that would be years away. Sprint has a unique band of both high-frequency and low-frequency airwaves great for speed and coverage over distances, although they require special radios, while T-Mobile last year won a valuable swath of low-frequency spectrum it is currently rolling out.
These assets are critical as the industry makes its transition to 5G. All of the carriers are jockeying to be first in the next-generation wireless technology, which promises significantly higher speeds and better, more responsive coverage.
T-Mobile says it will bring 5G to 30 cities this year, but won’t launch the service until the smartphones arrive in 2019. Likewise, Sprint will deploy 5G in six cities this year, and launch next year.
While the two companies have struck a deal, don’t count anything out between these two.
The two companies, after all, ended talks late last year because they reportedly couldn’t agree on the ownership structure.
They’ve tried to merge before. Sprint’s parent, Japanese carrier SoftBank, tried to strike a deal with T-Mobile majority shareholder Deutsche Telekom in 2014, but dropped its attempt when the government signaled that it favored four national competitors.
The current White House and the Republican-controlled Congress and Federal Communications Commission are more open, so the companies may feel the pressure to close this deal in case a new administration takes over.
So it may be now or never for T-Mobile and Sprint.
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