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.”
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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.
<p>I don't see how this merger would necessarily accelerate 5G development. Of course there is no consensus on the technical definition of 5G anyway. </p>
<blockquote><a href="#267449"><em>In reply to Waethorn:</em></a></blockquote><p>The key phrase is "depending on who you ask". Operators have taken the position that a change in cellular technology that isn't compatible with the previous technology is all that is needed to qualify an increment to the generation number. Thus "4G" isn't really based on a standard, but rather it's a cellular technology that is newer and incompatible with "3G".</p>