Sprint and T-Mobile on Sunday announced a $26.8-billion merger that could reshape telecommunication industry in the U.S. The deal which is expected to test regulators' and consumers' enthusiasm for more corporate consolidation is the latest attempt by T-Mobile, the U.S. third-largest wireless carrier and Sprint, (fourth-largest) to amass subscribers by combining forces in a challenge to the nation's number one largest Verizon and the runner-up AT&T severely, mostly at this point of significant network transition in the industry – switching to 5G network, the ultra-fast wireless technology. For Sprint, the merger would be a bailout from losses as the company has failed to record a profitable year in more than a decade.
T-Mobile, run by Germany's Deutsche Telekom and Japanese SoftBank Sprint have worked on such tie-up before now but could have faced tough regulatory scrutiny in Washington. The idea of having at least four competing wireless network carriers has always been accepted by the Federal officials as the condition that would force quality services to the consumers through competition.
According to LaTimes, Sprint and T-Mobile executives, this time aims to persuade regulators that the two companies need more resources - each other to provide a sustainable 5G wireless service around the country.
"This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could on its own," said T-Mobile CEO John Legere who will service as leader of the merged company.
"As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf," Legered added.
The combined company which will operate under the name T-Mobile could send AT&T into becoming the nation's third-largest wireless provider from its current second position. The new T-Mobile would have about 100 million subscribers in the U.S. more than AT&T which is currently having 93 million subscribers and also coming close to Verizon's 116 million subscribers. The new T-Mobile's annual revenue would be about $74 billion compared to AT&T and Verizon's $71 billion and $88 billion annual revenues respectively.
In a response to the merger, a policy advisor for New Street Research, Blair Levins said: "Telecom is a scale business. There are huge advantages of scale, and T-Mobile and Sprint have been carrying the cost of a network over a much smaller number of customers."
It is clear that Sprint and T-Mobile had flirted with this kind of combination for many years now. They abandoned it last time because of political problems. Sprint attempted acquiring T-Mobile in 2014 but Obama administration blocked the merger as it would reduce competition in the industry to reduce service quality. In 2011, the same challenge stopped AT&T from acquiring T-Mobile.
The merger will be reviewed by the Federal Communications Commission and the Justice Department to ensure that competition and consumers are protected. However, Sprint and T-Mobile said the deal could close early 2019.