When 2 Become 1: T-Mobile and Sprint merger

February 28, 2020

2 min read

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What's going on here?

US Judge Victor Marrero has ruled in favour of T-Mobile’s acquisition of Sprint.

What does this mean?

In 2018, T-Mobile CEO John Legere and Sprint CEO Marcelo Claure announced the merger between the third and fourth-largest mobile carriers in the US. They submitted an application to the Federal Communications Commission (FCC) on 18 June 2018 which kickstarted the regulatory review process for the $26bn deal. The Justice Department had already signed off on the deal, conceding that the merger would boost competition in the industry, create jobs, and build a broad nationwide coverage of their 5G network. The merged mobile carrier will have a combined 135.8m subscribers, bringing it closer to rivals AT&T (141m subscribers) and Verizon (150m subscribers). The FCC’s backing of the deal is based on the two companies’ promise of rolling out an extensive 5G network to currently underserved communities across the US and in rural areas. This proposed 5G network will span across 97% of the US within three years of the merger and 99% within six years. 

The companies have had to make concessions to push the deal forward. The Dish satellite company will get spectrum, Sprint’s Boost Mobile and Virgin Mobile businesses along with access to T-Mobile’s wireless network while it builds its own network. T-Mobile has agreed to fix the price for three years.

What's the big picture effect?

The merger still faces several hurdles from lawsuits filed by a number of states. There are concerns that the merger would harm mobile subscribers nationwide by reducing access to affordable and reliable wireless services, particularly impacting lower-income households and minorities. These lawsuits may delay or halt the merger yet. However, New York Attorney General Letitia James dropped the state’s case against the merger, including any threat of appeal. Colorado and Mississippi have also dropped their lawsuits on the basis that additional jobs will be created as part of the merger.  

Increasing job growth appears to be a consideration taken into account by many states as a means to boost the economy and create strong growth. Of course, there are still concerns about the potential oligopoly (where a market is controlled by just a few firms) formed as the number of mobile carriers is reduced from 4 to 3. Arguably, this reduces the competition within the already tight industry. However, the CEOs of both companies have noted that the merger will allow for greater synergies between the firms, allowing them to develop a strong 5G system nationwide. This development may prompt other dominant industry players to become more innovative to compete against the new T-Mobile. 

Report written by Robyn Ma

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