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T-Mobile Will Buy Sprint For $26.5 Billion, If the FCC Approves

After years of toying with the idea, T-Mobile is finally buying Sprint, for $26.5 billion. This could be good news for 5G networks, but possibly bad news for wireless competition.

Assuming that T-Mobile and Sprint can get this deal past regulators—and that’s a mad-sized “if”, given that AT&T and T-Mobile were barred from merging in 2011 on the ground that it would decrease competition—the new company would be called simply T-Mobile, and would have a combined total of over 126 million subscribers (according to Q4 2017 numbers). This would put it behind AT&T which has 141 million, and Verizon with 150 million.

The reason this merger is going through now, though, may have less to do with subscriber accounts and more with the upcoming and inevitable 5G rollout. Sprint has faced lackluster profitability, even facing net losses for several recent quarters. This puts it at a strategic disadvantage when it comes to building out a new network.

Meanwhile, T-Mobile has the cash, but spectrum has been a problem. While T-Mobile has been rolling out a lot of low-frequency spectrum—which is good at traveling long distances and penetrating buildings—it doesn’t have as much high-frequency spectrum, which doesn’t travel as far but can carry a lot more data. Combining the spectrum and network assets from both companies could give it the edge it needs to build a proper 5G network that can compete with AT&T and Verizon. The new T-Mobile could even push for the 5G rollout to happen faster than it would otherwise.

Of course, having a better network isn’t the same as having strong competition. In the years since T-Mobile failed to merge with AT&T (and got an influx of $4 billion for its troubles), the company has branded itself as the “Uncarrier” and pushed new plans with things consumers want like unlimited data plans, and removing restrictions from calls and texts by default. The other carriers have had to follow suit in part or whole, resulting in generally lower prices (or at least more for your money) for everyone.

If there’s a chance that the T-Mobile/Sprint merger could reduce that kind of competition, regulators may not approve. The AT&T/T-Mobile merger fell apart for similar reasons, and current federal regulators are pushing back against an AT&T/Time-Warner merger. While the latter is not a wireless carrier deal, it is one more attempt at consolidation from a media and service provider company that isn’t playing well with the government.

There will also likely be substantial job losses from the T-Mobile/Sprint merger. As is the case with all mergers, as redundancies are found, lay offs happen. That’s just one more mark against it that T-Mobile is going to have to spin as a positive if they want the deal to go through. There’s a solid case to be made that cell service could improve under a newly merged T-Mobile, but the question is whether or not Americans are willing to pay for it.

Source: Bloomberg

Eric Ravenscraft Eric Ravenscraft
Eric Ravenscraft has nearly a decade of writing experience in the technology industry. His work has also appeared in The New York Times, PCMag, The Daily Beast, Geek and Sundry, and The Inventory. Read Full Bio »