Already frustrated with the lack of options when it comes to picking a cellphone provider? You might be about to have even fewer. T-Mobile and Sprint have reached an agreement to merge, the companies announced on Sunday. If successful, that would shrink the number of major wireless carriers in the United States to three. Shareholders and regulators would still have to approve the $26 billion deal, which the companies have tried twice before.
That a T-Mobile–Sprint tie-up might be on the horizon is not a surprise. The companies first discussed a merger in 2014 but scrapped it over concerns that Obama antitrust regulators would block it. They called off merger talks again in November 2017 after majority shareholders — the Japanese tech giant SoftBank owns Sprint, and Deutsche Telekom of Germany owns T-Mobile — failed to reach an agreement about who would control what post-merger.
Since then, the parties involved appear to have ironed out their disagreements — and they expect more amenable regulators from the Trump administration. T-Mobile CEO John Legere, who will stay on as CEO of the combined entity that will stay named T-Mobile, touted the deal in a series of tweets on Sunday. He said the merger is for the “benefit of customers” and meant to bring a “broad” and “deep” 5G nationwide network. He said the combined company will invest $40 billion in its new network in business within three years.
Let me reiterate what I’ve said time and time again – everything @TMobile does is for the benefit of customers - this move is no different. The New T-Mobile will supercharge the #uncarrier strategy for the entire country! More here: https://t.co/KhZsj3PFs8— John Legere (@JohnLegere) April 29, 2018
This all kind of reads like a big effort to woo the Trump administration into approval
If the deal goes through, the combined T-Mobile–Sprint will have nearly 100 million customers, behind Verizon Communications and AT&T.
T-Mobile and Sprint have to walk a fine line with regulators if they hope to get the deal approved. In 2014, then-Federal Communications Commission Chair Tom Wheeler said that regulators would be “skeptical” of mobile industry wireless proposals. And before that, in 2011, the Justice Department’s antitrust division sued to block AT&T’s proposed $39 billion deal to buy T-Mobile because of anticompetitive concerns, which ultimately sank the deal.
Under President Trump’s FCC, however, Sprint and T-Mobile might have a more sympathetic audience in current Chair Ajit Pai.
In their merger announcement, the companies touted the plan as one that would accelerate 5G innovation — that’s likely a nod to the Trump administration, which appears to have taken an interest in the technology. In January, it was reported that national security officials were considering a plan to nationalize the United States’ next-generation 5G wireless network in an effort to guard against competitive and cybersecurity threats from China. And in March, Trump blocked a proposed deal between Asian chipmaker Broadcom and its American competitor, Qualcomm. The US government had expressed concerns that the tie-up might affect the race between China and America to develop 5G technology.
“Only the combined company will have the network capacity required to quickly create a broad and deep 5G nationwide network in the critical first years of the 5G innovation cycle — the years that will determine if American firms lead or follow in the 5G digital economy,” Sunday’s merger announcement reads.
T-Mobile’s Legere and Marcelo Claure, CEO of Sprint, appeared in a video together with the announcement touting their plan to accelerate 5G development.
The video also claims the combined company will create “thousands of American jobs” and “boost US economic growth” with a $40 billion investment in business and 5G technology. T-Mobile COO Mike Sievert said in a tweet the combined company will add jobs in customer service, retail, and engineering.
In other words, Sprint and T-Mobile are trying to tell the White House their deal is a good thing for America.
That kind of innovative leadership will boost US economic growth and lead to the creation of thousands of US jobs, including jobs at the New @TMobile. As we build a competitive force, we’ll be adding customer svc, retail & engineering jobs. Info below. https://t.co/jMe9izDwiG pic.twitter.com/HMuLoZ5dqd— Mike Sievert (@SievertMike) April 29, 2018
It’s also worth noting that SoftBank CEO Masayoshi Son, the majority owner of Sprint, met with Trump during the presidential transition in December 2016. Trump said SoftBank would invest $50 billion in the US and create 50,000 jobs.
Masa (SoftBank) of Japan has agreed to invest $50 billion in the U.S. toward businesses and 50,000 new jobs....— Donald J. Trump (@realDonaldTrump) December 6, 2016
Telecom mergers and acquisition deals seem boring, but they’re a big deal
Investors are excited about the proposed T-Mobile–Sprint tie-up — a report that the deal was close on Friday drove up Sprint’s stock price 8 percent, T-Mobile’s by about 1 percent, and SoftBank’s by about 3 percent. But as to what it means for consumers — well, it might not be great.
The fewer competitors there are in the mobile provider arena, the easier it is for prices to go up — that’s what Obama-era regulators argued, and it’s the economic theory at the basis of US antitrust law. Companies are less incentivized to keep costs for their customers low if they have fewer competitors to fight over them with.
T-Mobile and Sprint say their merger will create more competition because they’ll be able to compete better with Verizon and AT&T. But overall, there are going to be fewer players in the pool, meaning things could very possibly go the other way.