Your choice in phone carriers is about to drop by one, as T-Mobile and Sprint announced their long-awaited plans to merge today (April 29).
The $26 billion deal will combine the third- and fourth-largest carriers in the U.S. and create what one T-Mobile executive touted as the nation's highest-capacity network. John Legere, T-Mobile's CEO who will remain in charge of the combined company, says that the newly merged T-Mobile will have 30 times the network capacity that it does today once the deal closes.
When that will be remains subject to regulatory approval, though Sprint and T-Mobile are eyeing the first half of 2019. Both the Federal Communications Commission and the U.S. Department of Justice have to OK the deal, and that's been a roadblock to such mergers in the past. A combination of AT&T and T-Mobile in 2011 was scuttled in the face of regulatory opposition, while Sprint and T-Mobile called off merger talks in 2014 after regulators indicated they would oppose that deal.
Of course, those mergers fell apart under a very different presidential administration. T-Mobile and Sprint pitched their new proposed merger in terms that seemed geared toward resonating with the current administration, touting benefits for global competitiveness and job growth.
Both Legere and Sprint CEO Macrelo Claure, who will remain on the board of the combined company, said the merger was essential for speeding up the transition to the 5G networking standard in the U.S. That deployment is expected to begin by year's end, with the first 5G-enabled phones arriving in 2019. "What happens in the first few years of a new technology is crucial," Claure said in a video with Legere announcing the merger.
"Only the new T-Mobile will have network spectrum and technology to quickly create a broad and deep 5G network in the first few years of the 5G innovation cycle," Legere added.
The two CEOs also touted job creation as a benefit of the merger, specifying new jobs in call centers for the combined company as well as in 5G deployment. That would fly in the face of the rationale behind most mergers — typically, the first thing that combined companies do is eliminate duplicative jobs. But Legere pointed to T-Mobile's acquisition of MetroPCS five years ago, contending that three times the number of people now work at MetroPCS since the carriers combined forces.
Legere and Clare also argued that competition in the wireless business extends beyond their two companies, AT&T and Verizon. Comcast now offers wireless service to its customers, for instance, and other cable and internet providers are reportedly eyeing the wireless market, too. Verizon and AT&T both offer home internet, while AT&T is trying to merge with Time Warner.
While Legere promised "a company that will supercharge the Uncarrier strategy and create robust competition and lower prices across wireless, video and broadband," the impact on consumers of a combined T-Mobile and Sprint remains to be seen.
T-Mobile, in particular, has pushed the industry toward adopting more consumer-friendly policies like attractively priced unlimited plans and the end of two-year contracts to attract new customers. Sprint, in its role as the No. 4 carrier, has gotten aggressive with pricing, offering the lowest-priced unlimited plan and waiving fees on additional lines for up to a year. Whether that continues once the companies merge is anyone's guess.
There's also the matter of prepaid businesses. In addition to their own prepaid plans, T-Mobile and Sprint both own low-cost carriers — MetroPCS in T-Mobile's case and Boost and Virgin Mobile for Sprint. Those low-cost carriers have tried to out-do each other with aggressive pricing and other deals, and it's unclear if that will continue once they're under the same corporate umbrella. That could potentially impact lower-income customers.
There are technical issues to address as well. T-Mobile uses the GSM networking standard, while Sprint operates on CDMA. Under the proposed merger, T-Mobile will spend the next few years moving Sprint customers to T-Mobile's network, though details are sparse at the moment.
We'll have more on the proposed T-Mobile/Sprint merger as details become available.