T-Mobile and Sprint Merger: Positive Outcome Expected
Last week, U.S. District Judge Victor Marrero approved T-Mobile purchasing Sprint,. The $26 billion merger, referred to as the new T-Mobile, goes all the way back to 2017 when Softbank considered selling their shares of Sprint to Deutshce Telekom, which will effectively merge Sprint with T-Mobile. In April 2018, the companies announced the merger. Throughout last year, obstacles arose as attorneys in fifteen states in total joined the lawsuit to block this merger.
The main reasons for the attorneys attempts to block the deal are the potential ability for the new T-Mobile, along with AT&T and Verizon, to control the telecommunications industry. Having said that, statistics show that the industry will get more concentrated if the deal successfully closes. By the end of 2019, AT&T and Verizon dominated the telecommunications industry; AT&T had approximately 166 million subscribers, and Verizon had 119 million. These two giants hold more than 65% of the market share, taking approximately 30% each. However, the merger of T-Mobile, which has 83 million subscribers, and Sprint, which has 54 million subscribers, will enable the new T-Mobile to compete against the dominating forces; if the merger closes, they will hold approximately 30% of the market share (137 million subscribers). The judge opposed the idea that this deal will hinder the competition in the industry as he stated that Sprint did not have “sustainable long-term strategy [to remain competitive in the industry].”
The deal will not only help both companies be more competitive through gaining higher market share, but it will also help deploy their 5G network across the United States. The new T-Mobile has promised to initially, in the first three years after the merger, cover 97% of the U.S. population with 5G. In six years, they project to cover 99%.
Subsequently, T-Mobile and Sprint consumers are worried that their plans might be more expensive due to improvements in service quality. On top of that, critics of this deal argue that the integration between T-Mobile and Sprint will cause many problems since they use different networks. For example, T-Mobile is a GSM network, while Sprint is a CDMA network, and most phones cannot work on both networks at the same time.
Even so, it is only natural for a newly merged company to face problems that haven't existed before. Smartphone users, on average, tend to buy new phones every 24.7 months. Having said that, since the actual impact of this deal takes effect three years after the deal closes, most smartphone users should have no problem integrating their new phones to the new T-Mobile carrier systems. Moreover, John Legere, the CEO of the new T-Mobile, promised to provide better value services, implying that there will be minimized price changes to their plans.
If all or even some of their promises hold, the deal does not seem to have antitrust issues. Although it is true that smaller phone companies will have a harder time entering the telecommunications industry, it has already been maturing, with two big forces competing with each other. Now, with T-Mobile joining the two dominant forces, AT&T and Verizon, the merger will create the new “Big-3.” This will allow for more competition between companies in the industry, making the industry more dynamic and competitive.
Another economic impact of this deal is that more jobs will be constantly created. The new T-Mobile aims to instantly create 3,625 jobs within a year after the deal closes and reach 7,400 job opportunities by the end of 2024. If true, there is nothing to be concerned about this deal.
Considering the expected impact of this deal, the Judge’s decision to approve this deal seems appropriate, and it should be exciting to see what changes will be made to the telecommunications industry after the deal successfully closes.
Sources:
https://www.t-mobile.com/news/new-t-mobile-commitments
https://www.androidauthority.com/t-mobile-sprint-merger-plans-921398/
https://www.cnbc.com/2019/05/17/smartphone-users-are-waiting-longer-before-upgrading-heres-why.html
