Michael Crider
Long-standing American carriers Sprint and T-Mobile are merging. Such big corporate moves aren’t always guaranteed in the US, but all indications are that this will clear the federal government’s regulatory hurdles and that the country’s wireless industry will be further consolidated.
This morning T-Mobile and Sprint announced that the final details of the merger had been approved by both companies and their investors, with the new corporate entity simply known as T-Mobile. Effective immediately, Sprint will cease to operate on the New York Stock Exchange.
What does that mean for you if you’re a Sprint or T-Mobile customer? At this point, we can’t say with certainty. But based on T-Mobile’s initial announcement and a few combined decades of covering US wireless news, we think we can be pretty confident in how this will shake out, at least on the consumer end.
A Quick History Lesson
Sprint and T-Mobile have been trying to merge, both with each other and with other American carriers, for a long time. If you don’t care about that, well, I can’t really blame you. Feel free to skip to the next section.
T-Mobile US goes back to the late nineties as an independent company called VoiceStream, spun off from a division of Western Wireless. Deutsche Telekom of Germany (which is what Europeans think of when you say “T-Mobile”) purchased the company and re-branded in 2001 with its familiar magenta identity.
Sprint is far older, at least technically, with roots in old-fashioned American wire telephone services going back to the start of the 20th century. The Sprint brand was born in 1982, when GTE purchased Southern Pacific Communications from its parent company, the famous railroad. (Yes, that railroad!) After a few mergers and acquisitions, Sprint became independent in the late 80s and started offering cellular service in the mid-90s, but spun off its cellular business quickly and sold it to a competitor. The network that’s still operating is actually the company’s second attempt, started in 1995 after acquiring wide bands of wireless spectrum.
Through the late 90s and 2000s both companies would buy, merge, and move within various others in the rapidly booming telecom industry, with the big news for Sprint being a pricey merger with Nextel. This was something of a mess in corporate terms, leaving Sprint’s coffers depleted. The company was still in a very firm fourth place in the US market.
Facing stiffer competition from an emerging duopoly of AT&T and Verizon, Deutsche Telekom attempted to sell the US version of T-Mobile to AT&T in 2011. That deal was all set to go, but the Justice Department under a less corporate-friendly Obama administration did not allow the sale. As a condition of the deal falling through, AT&T had to pay T-Mobile billions of dollars and cede huge swaths of wireless spectrum. Around the same time, Japanese telecom giant SoftBank acquired a struggling Sprint, beating out satellite TV provider DISH Network in a bidding war in 2013.
That left both companies in the form you’ll recognize today. Since the failed merger with AT&T, T-Mobile has been branding itself as the “Un-carrier,” offering customer reward programs and pioneering contract-free service and zero-interest phone loans that are now the standard in the US. The company has been aggressively expanding its network, but still isn’t anywhere near as large as AT&T or Verizon. Sprint has been puttering along with an older and less reliable network, with its former reliance on CDMA technology hampering it in terms of phone selection until recently.
Deutsche Telecom and Softbank have been looking for other companies to buy or otherwise spin off both T-Mobile and Sprint more or less continuously. The current Sprint-T-Mobile merger has been in the works since 2017 (though there were efforts even before that), helped by a more pro-business Justice Department under Trump and a less monopolistic theoretical outcome. The DoJ gave preliminary approval for this merger in 2019.
As of today, a combined Sprint-T-Mobile would hold approximately 30% of the US wireless market, making it roughly equal with Verizon and a fair bit behind AT&T’s 40%. A market with three major competitors is more likely to be approved by regulators than just two.
Consolidation Means Higher Prices…
With smaller and less reliable networks, both Sprint and T-Mobile have been positioning themselves as the “budget” service option, at least among the US big four. With their powers and customers combined, T-Mobile is likely to increase prices as AT&T and Verizon seem like smaller giants, and the various budget MVNO networks become less of a threat to its bottom line.
According to T-Mobile’s final merger announcement, that won’t happen for a while, at least not for everyone. “The new T-Mobile has committed to delivering the same or better rate plans for three years, which includes access to 5G, including for prepaid and LifeLine customers.” Note the language here: nothing is said of current Sprint users or those on either company’s subsidiaries, like Metro and Boost Mobile. This statement leaves a lot of wiggle room for the combined T-Mobile to seek new profit lines.
That’ll probably be frustrating for customers. At the moment both Sprint and T-Mobile occupy a happy middle ground, with more support and phone options than the more budget carriers while offering lower prices than AT&T and Verizon. The combined company will probably keep the former strength (though support and sales will be necessarily fuddled as the companies combine) while boosting service prices.
So, monthly service prices will go up eventually, made even easier now that more customers go without a contract that locks them into lower prices for years at a time. But competition won’t completely disappear among a “big three.” Expect T-Mobile to continue to offer more tempting deals on new phones as a means of attracting new customers. That strategy is only becoming easier as flagship smartphones consistently break the $1000 mark.
…But Fewer Headaches Than You Think
The last time a merger of this size happened in the US market was when the old Cingular acquired what was left of AT&T Wireless, then itself got gobbled up by SBC and became the now consolidated AT&T in the mid-2000s. (Good GOD, wireless mergers and acquisitions are complicated.) But a more relevant template is probably when T-Mobile acquired the smaller MetroPCS in 2013.
During that merger, the GSM-based T-Mobile had to integrate Metro’s CDMA-based network, a problem because the two networks use different and incompatible standards. Thanks to the rise of GSM-based LTE, it wasn’t that big of a deal—new phone radios could handle GSM and CDMA networks with equal aplomb. Sprint’s network used to be entirely CDMA, but thanks to the industry-wide shift to LTE, its phones already play nice with GSM networks.
T-Mobile eventually rebranded MetroPCS into its own budget brand, now “Metro by T-Mobile.” All indications are that the same thing will happen here: the final merger announcement is coming directly from T-Mobile, which says the combined company will only use the T-Mobile branding. Much was made of the “Un-carrier revolution,” with barely any mention of Sprint’s accomplishments, such as they are. It looks like the Sprint brand won’t exist for much longer.
So, the most likely change for T-Mobile customers is a re-shuffling of wireless plan options, as happens every few years anyway. For existing Sprint customers, the same is true, with the only major change being the name of the company at the top of their wireless bill. A few headaches may occur as the old infrastructure is changed—moving to a new website to manage your wireless account, for example—but T-Mobile has handled this before and is in a good position to do it again.
A Push into Home Internet Service
T-Mobile’s merger announcement is making some lofty goals for the combined company with Sprint’s assets. Notably, T-Mobile says it will have fourteen times the wireless capacity, fifteen times the wireless speed, and 99% population coverage with 5G access in six years.
T-Mobile also confirmed what many industry analysts have predicted: this wide rollout of high-bandwidth wireless service is going to be positioned as an alternative to conventional in-home internet service, like DSL, cable, and fiber optic. In technical terms, it’s certainly plausible—current 5G service can’t match the full-power speed of fiber, but if customers can get over 100Mbps, most probably won’t care about the difference.
AT&T, with its combined wireless, TV, and home internet subsidiaries, is already blazing a trail here. Expect T-Mobile to offer discounts and other incentives for customers to combine wireless and home internet under the same bill. This may be especially attractive to rural customers who have been woefully under-served by American home internet providers. T-Mobile specifically said it’s planning to offer 50mbps speeds for 90% of the rural population in the country.
No, You Don’t Need a New Phone (Yet)
Can you keep your current phone? Absolutely. First of all, keep in mind that the merging of billion-dollar companies doesn’t happen overnight, and the combined T-Mobile won’t emerge in a final form for somewhere between two and five years. So there’s a good chance your current phone won’t even be a factor when that happens.
As the two companies consolidate, plans will go into effect that mean new phones bought for either network will work on both and continue to work as the networks combine. You’ll probably see a lot of change on the customer service side—unfamiliar payment portals and apps, for example. But the majority of new phones bought during the transitional period will be bought or even built with that upcoming shift in mind.
The only casualties are likely to be low-cost flip phones used by customers who don’t care about Android or iOS, but those phones are so cheap to replace that the problems will be minimal anyway.
5G is another matter. As with the initial rollout of LTE, differing 5G wireless bands and radio standards are already a confusing mess. But with Sprint and T-Mobile both looking to the future, and with the high-frequency, low-coverage nature of 5G necessitating a slow rollout anyway, things are a bit different this time around.
To put it simply, by the time most people will be in the market for a new 5G phone, the newly-combined T-Mobile corporation will at least have a plan in place to make sure it’s using a single standard nationwide. Whether you’ll be able to actually enjoy 5G service from the new company will probably depend on where you live; densely-packed urban areas get priority, with rural customers being much later to the party than usual.
