T-Mobile + Sprint = 5G

Posted on April 30, 2018 by Paul Thurrott in Cloud, Mobile with 22 Comments

T-Mobile + Sprint = 5G

After years of failed attempts, T-Mobile and Sprint announced over the weekend that they had reached an agreement to merge. What’s different this time? Now, they have a good story to sell to antitrust regulators.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience,” T-Mobile CEO John Legere said in a prepared statement, “and do it all so much faster than either company could on its own. As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”

Based on each company’s share price at the close of trading on Friday, the deal values Sprint at $59 billion and the combined new company, which will be called T-Mobile, at $146 billion.

If approved, the merger will upend the competitive situation in the U.S. carrier market, which has two giant companies, Verizon and AT&T, and two smaller firms, T-Mobile and Sprint. With one fewer carrier, the new T-Mobile would be big enough to take on Verizon and AT&T directly.

The new company would be based at T-Mobile’s current headquarters in Bellevue, Washington, but it would also maintain a second headquarters in Overland Park, Kansas, where Sprint is currently located. It would be run by Mr. Legere and his current lineup of top-level executives.

The merger is certain to face antitrust scrutiny, and there is ample evidence that reduced competition near-universally leads to higher prices for consumers. And on that note, the firms are, of course, talking up the types of “cost-saving synergies” that never actually pan out in the real world.

But the timing of this latest merger attempt is right, and T-Mobile and Sprint have a better card to play: With the U.S. government fixated on its xenophobic policies aimed at thwarting China, the carriers and pushing the notion of a U.S. company leading the charge to 5G networking, beating China in the process. And T-Mobile/Sprint are promising a $40 billion investment along those lines.

Smart.

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