T-Mobile, Sprint to merge as 5G race gets started
Deal leaves 3 wireless carriers; critics worry about lack of competition
T-Mobile and Sprint are merging in a deal that would create the No. 3 U.S. cellular carrier but could signal that the days of aggressive competition for customers are coming to an end.
The merger, an all-stock deal announced Sunday, will see Sprint become part of the T-Mobile brand. Under the deal, Sprint has an implied enterprise value of $59 billion, and the combined company will be worth roughly $146 billion.
The two companies say that for consumers, the deal will result in lower prices, more innovation, jobs and better wireless service, especially in the rural U.S.
They’re also touting the merger as a way to best position the two companies to compete in the forthcoming 5G race
for faster mobile internet.
T-Mobile had about 73 million subscribers at the end of last year and Sprint about 54 million. Compare that to AT&T, which, including connected “Internet of Things” devices, had about 141 million subscribers, and to Verizon, with its 162 million.
“It’s a very simple rule of business. Both companies need each other,” Sprint CEO Marcelo Claure said. “The reason why this is going to work is that T-Mobile cannot do the 5G strategy without Sprint, and Sprint cannot do it without TMobile.”
The new company will be named T-Mobile.
“Convergence between mobile broadband and cable isn’t just a hypothetical,” said T-Mobile CEO John Legere. “It’s a reality of our business on a day-to-day basis.”
He said the merger will result in thousands of new jobs right away, with the potential to create “tens of thousands” of new jobs later, but analysts wonder how that’s possible with so much overlap between T-Mobile and Sprint.
More than 200,000 people will work on behalf of the combined company in the U.S. at the start. And the merged company’s plans to invest up to $40 billion in its new network and business in the first three years alone is a massive capital outlay that could fuel job growth at the new company and across related sectors.
About 85 percent of Sprint is owned by Japanese telecom titan SoftBank Group, run by Sprint chairman Masayoshi Son. T-Mobile’s parent company is Germany’s Deutsche Telekom.
Legere will remain CEO of the new T-Mobile. Marcelo Claure, who co-founded wireless company Brightstar and was named Sprint CEO in 2014, will become a member of T-Mobile’s board.
Mike Sievert, T-Mobile’s current chief operating officer, will become president and COO of the new T-Mobile.
Should the companies merge, Sprint subscribers might see some new pricing arrangements available and could become eligible for T-Mobile promotions such as free Netflix subscriptions.
Those on T-Mobile might get Hulu or Tidal subscriptions in return, as Sprint has been promoting under some of its plans.
The deal requires regulatory approval.
Not everyone believes the merger is a good idea.
Gigi Sohn, a distinguished fellow at the Georgetown Law Institute for Technology Law & Policy, said the deal will mean fewer choices for customers and could prompt the three remaining companies to “act in concert.”
“Both companies have been feisty competitors to the two biggest national mobile wireless carriers, Verizon and AT&T, introducing consumer-friendly pricing and data plans that have pushed the big two to lower their prices and expand their data offerings,” she said in an email.