T-Mobile US and Sprint have been trying to merge for more years than I can count. There have been issues and roadblocks from the government, regulators and the companies themselves. So, why has it been so difficult for these two to actually get together? Let’s explore the path they have taken to get here and what impediments they still face today.
If you remember, Masayoshi Son, Chairman of Softbank from Japan acquired the majority of Sprint several years ago. That was tough enough, but he got the deal done. Then he tried to acquire T-Mobile US, but the U.S. government made it clear that would not happen.
So, Son said goodbye to Dan Hesse, CEO of Sprint and brought in Marcelo Claure as new CEO of Sprint. They spent the last several years dodging competitive blows from T-Mobile US as both seemed to grow.
However, now that years have passed, we see that while T-Mobile US has grown, Sprint has struggled. They have grown, and that’s good, but not nearly at the same pace as T-Mobile US or the wireless industry in general.
Once again, last year both T-Mobile US and Sprint tried to merge once again. This time, they couldn’t come to an agreement on valuation of the two companies, so they eventually walked away.
Knowing how badly both sides want this deal, I knew it was just a matter of time before they tried once again. And they did, a few short months ago. They finally came to terms and agreed to merge. About time!
Now, they just have to convince regulators to allow them to do so.
In the last few years, the wireless industry has been moving toward 5G and other growth areas. We have seen the cable television industry move into wireless with Comcast Xfinity Mobile and now Charter Spectrum Mobile. Altice Mobile will happen next year. I also expect to see other companies in other industries enter wireless. Companies like Facebook, Amazon, Netflix and others.
However, while T-Mobile US has shown strong growth in the 4G wireless space, the move to 5G is much more difficult and expensive for them to accomplish on their own.
T-Mobile US great marketer, Sprint has loads of wireless data spectrum
The fact is, T-Mobile US is a great marketer, but they have very little wireless data spectrum. On the other hand, Sprint has struggled with marketing and growth, but has loads of wireless data. Together seems to be the secret sauce that can help them both be successful moving forward.
Sprint needs the merger for growth. T-Mobile US wants the merger to get their hands on the wireless data spectrum. It seems like a match made in heaven if they can cross the finish line.
If they cannot get together, these two companies will struggle as the wireless world moves to 5G. Together, with the strengths of both companies combined, marketing and spectrum, a combined company should be able to compete much better going forward.
That’s why these two companies have decided it’s better to come together and merge as opposed to staying separate. Separate they are weaker going forward. Together they can be stronger and more competitive.
The most current earnings report shows T-Mobile US still growing strong and Sprint growing, but not as fast.
If they do not merge, the performance of both may start to wind down as we move closer to 5G in the next year or two. That would be a pity.
Wireless choice: The difference between merger or no merger
This is the decision regulators have. Should they approve the merger and let the wireless industry be reduced from four competitors to three, or should they say no and keep four players?
The first way, reducing the competitive playing field to three, would mean users would have three strong competitors to choose from. The second way, keeping four players, would mean we would have two strong and two weak competitors as we move to 5G.
That’s the choice regulators face. So, will they look forward toward the changing 5G world, or will they look backwards toward the way things used to be?
If regulators choose the right way, both T-Mobile US and Sprint investors, workers, executives and customers will win. If they choose the wrong way, these parties will struggle going forward in the new 5G world.
This merger has taken years to get to this point. And to tell you the truth, I don’t know the direction regulators will go with this.
However, for a strong T-Mobile US and Sprint we are better off with three, strong wireless competitors rather than two strong and two weak ones. But it’s all up to the regulators. So, now we just sit and wait for an answer.
