- The Justice Department just approved T-Mobile’s acquisition of Sprint, removing a major hurdle in uniting the two telecom giants.
- A merged company would create a strong rival to AT&T and Verizon, position it to speed up building 5G wireless, and help Dish become a major wireless player.
- Here are the potential winners and losers of the deal.
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TheJustice Department has approved T-Mobile’s acquisition of Sprint, removing a major hurdle in combining the No. 3 and No. 4 wireless companies together.
The approval came after the two companies agreed to sell off parts of their businesses to pay-TV operator Dish, which would create a fourth major wireless player.
Read more:Here’s what to expect in 5G from the ‘Big 4’ carriers as Verizon, AT&T, and others battle for dominance
Here are the potential winners and losers from the deal.
T-Mobile and Sprint
The obvious big winners of the merger would be T-Mobile and Sprint themselves. Sprint has been laden with debt and losing subscribers, while T-Mobile has been gaining but still substantially lags AT&T and Verizon in subscribers.
A combined company would also be set up to upgrade T-Mobile’s and Sprint’s networks for 5G wireless technology.
“The companies have really complementary 5G spectrum bands,” said eMarketer Principal Analyst Yoram Wurmser. “Both have some millimeter band, while Sprint has a lot midband and T-Mobile has a lot of low band, which should give them a big advantage as they build out their 5G networks. Without the merger, the companies independently would have a hard time keeping up long-term with AT&T and Verizon.”
The merger could impact America’s standing in the race for 5G leadership and boost the economy, as 5G represents a quantum leap forward in terms of technology and the potential to spur growth, Alex Gellman, CEO and cofounder of Vertical Bridge, a wireless infrastructure operator,has argued.
Dish Network will become a bigger wireless company to compete with T-Mobile and Sprint, according to conditions both companies agreed on, and could emerge as the fourth wireless competitor.
It will also be able to rent T-Mobile’s network for seven years while it builds its own. Dish has wanted to become a wireless provider for about a decade, spending billions on airwaves that it has been storing for years, according to CNBC. Dish is buying prepaid cellphone brands such as Boost and Virgin Mobile and some spectrum, or airwaves for wireless service, from the two companies, according to the AP.
Some telecommunications analysts, including Craig Moffett at MoffettNathanson and Jonathan Chaplin at New Street Research, have questioned if a merger that strengthens Dish as a disruptive fourth wireless player is even worth it from T-Mobile’s perspective. Dish could end up a far more formidable competitor than Sprint.
To that end, Deutsche Telekom — the company that will control the combined entity —has argued for limitations on Dish’s ability to sell a percentage of its wireless business to a strategic investor, such as Amazon, Google, or a cable operator such as Comcast or Charter.
“If Dish enters the market with a large amount of capacity and no meaningful subscriber base of [average revenue per user] to defend, they would have every incentive in the world to be a disruptive discounter,” Moffett wrote in a note to clients late last week. “One need not believe in a follow-on Dish deal with Amazon, Google or a cable operator to see this as bad for the market, and indeed, worse than the ‘no deal’ scenario for T-Mobile.”
AT&T and Verizon
Big losers will be Verizon and AT&T, which will face another competitor of roughly equal size but with a superior position in 5G, Wurmser said.
T-Mobile spent $1.1 billion in advertising in the US in 2018 while Sprint spent $626,000, according to Kantar, and some of that spending could go away for ad-driven media companies when the market shrinks from four big players to three.
“You probably would see a reduction in advertising spend in a major way,” said Brian Wieser, global president of business intelligence at GroupM.
Some telcos (Verizon, AT&T) have gotten into the ad business, and a merged T-Mobile/Sprint could be positioned to follow suit, but those other wireless carriers have learned that because of privacy concerns, there’s limited opportunity in applying their data to advertising, Wieser said.
There are mixed views here. EMarketer’s Wurmser said less competition is never good for consumers since it usually leads to higher prices. “At the same time, the merged company’s strong 5G position would probably also force the other two companies to invest even more quickly in developing 5G networks,” he said.
But attorneys general from 13 states and the District of Columbiafiled a lawsuit to block the deal. They say the promised benefits, such as better networks in rural areas and faster service overall, cannot be verified, while eliminating a major wireless company will immediately harm consumers by reducing competition and driving up prices for cell phone service.
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