5 Things Solution Providers Need To Know About T-Mobile And Sprint's Merger Plans
The Urge To Merge
T-Mobile and Sprint, the third- and fourth-largest carriers in the U.S., respectively, Sunday unveiled their long-awaited plan to merge in a $26 billion deal. If approved, the two companies expect the deal to close in the first half of next year. In the meantime, T-Mobile and Sprint will operate as independent companies.
But this isn't the first time the two companies have tried to come together. With high regulatory hurdles to clear, it's still unclear if the two companies will eventually become one. Here are five things that solution providers should know about the current deal, what the convergence of two distinct wireless network would look like, and how losing one wireless player in the market could impact the channel.
Regulatory Challenges On The Horizon
The merger is by far a done deal. Sprint and T-Mobile's proposed deal will have to face the Department of Justice and Federal Communications Commission for regulatory approval. The bar is already high; this is the companies' third merger attempt.
It's unclear whether the merger will ultimately be allowed this time. While the Republican-led Justice Department and FCC are viewed as largely pro-merger, the current Justice Department has so far come down against AT&T's proposed monster acquisition of Time Warner for $85 billion. The Justice Department may have concerns about the wireless market losing a competitor, which could mean price hikes for customers. However, the FCC, currently led by Chairman Ajit Pai, has previously voiced his support of merger and acquisition activity in the telecommunications space.
Who Would Own What
Today, Overland Park, Kan.-based Sprint is majority-owned by its Japanese parent company SoftBank Group. German telecom company Deutsche Telekom currently owns about 64 percent stake in U.S. wireless provider T-Mobile, based in Bellevue, Wash. Via the terms of the proposed deal, Deutsche Telekom will own 42 percent of the combined company and will have voting and board control, while SoftBank will own 27 percent of the new company.
If the merger is approved, T-Mobile CEO John Legere will lead the combined company alongside his current team. The new company will retain the T-Mobile name.
Network Convergence
T-Mobile and Sprint are promising a combined network that will offer an efficient, improved and scalable service for customers. In the meantime, however, T-Mobile and Sprint will have to combine their separate networks, a process that could take about three years. That's because T-Mobile's legacy network is based on GSM technology, while Sprint's is based on CDMA, which are incompatible network technologies. Both carriers support LTE, however.
As of now, about 20 million devices, including some Samsung smartphones and Apple iPhones using the Sprint network, can run on the T-Mobile network, according to T-Mobile.
Off To The 5G Races
On the other hand, Sprint and T-Mobile each own complementary wireless spectrum. The companies plan on using this combined spectrum to build a 5G network that could rival what competitors AT&T and Verizon are building.
T-Mobile owns a large portfolio of lower-band airwaves that are good at traveling long distances and operate well indoors because they can pass through walls and windows. Sprint, for its part, owns the largest U.S. holding of higher-band, 2.5GHz spectrum that is capable of higher data capacity over limited distances.
The Competition
T-Mobile and Sprint have said that the merger will help the combined company better go head-to-head with the incumbents, AT&T and Verizon. Together, the new company will have the resources to give U.S. consumers and businesses a bigger, better network at a lower price, the two providers said in a statement. However, industry analysts and consumer advocates are questioning whether prices and data plans for consumers will continue to stay low once one of the wireless players is out of the market.
When and if the two companies combine, however, channel partners could stand to benefit from the new T-Mobile's expanded portfolio of offerings, as well as more robust coverage that could better attract enterprise customers, who have largely been defaulting to either AT&T and Verizon for their perceived reliability, solution providers told CRN.