Competition Dodges A Bullet As T-Mobile, Sprint Merger Dies

from the phew dept

In the end it wasn't regulators, but giant international egos that derailed Sprint's latest attempt to acquire T-Mobile. As last week's rumors had suggested, T-Mobile owner Deustche Telecom and Sprint majority owner Softbank couldn't agree on terms of the latest attempted megamerger, formally calling off the deal over the weekend. At issue, apparently, was the fact that T-Mobile wanted greater control over the merged company in the wake of the deal. Company executives wanted to keep T-Mobile's momentum, which has resulted in bigger net subscriber gains per quarter than any other U.S. carrier, intact.

The failure is good news for consumers, employees, and business customers alike. Wall Street had estimated that the deal would have killed between 10,00 and 30,000 jobs -- potentially more positions that Sprint currently even has. Telecom history suggests that the reduction of major competitors from four to three would have also had a profoundly-negative impact on overall competition (go ask a Canadian). As a result users not only likely would have seen higher rates, but the end of the recent resurgence in unlimited data plans -- only made possible by T-Mobile's competitive disruption of the market.

In a joint statement, the two companies pay a little empty lip service to the supposed "consumer benefits" of the deal, before promising to get back to upgrading their networks and competing:

"The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders. However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record,” said John Legere, President and CEO of T-Mobile US, Inc. “Going forward, T-Mobile will continue disrupting this industry and bringing our proven Un-carrier strategy to more customers and new categories – ultimately redefining the mobile Internet as we know it. We’ve been out-growing this industry for the last 15 quarters, delivering outstanding value for shareholders, and driving significant change across wireless. We won’t stop now.”

The death of the deal is perhaps extra good news for T-Mobile CEO John Legere. Legere has spent the last few years fashioning himself as a massive consumer ally (except for that whole opposing net neutrality and mocking the EFF thing), dropping F-bombs, and making fun of AT&T and Verizon. Selling consumers on a deal all-but guaranteed to devastate sector jobs and price competition would have required some PR acrobatics that challenge the laws of physics.

The death of the deal is ironic, given that Sprint will not likely have a better chance at getting regulatory approval. Softbank and Sprint spent the better part of the year buttering up the Trump administration, going so far as to let Trump take credit for Softbank job promises he not only had absolutely nothing to do with, but which were announced months before Trump even became President. Given the rubber stamp nature of the current FCC, the chances of regulators doing the right thing and stopping the job and competition-killing deal were far from certain.

Fortunately for consumers, fussy international egos derailed the deal before regulators had a chance to downplay how bad a deal it actually was. Sprint can now turn its focus toward striking deals with other companies like Altice and Charter; deals that won't erode the overall level of competition in the wireless sector.

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  • identicon
    Anonymous Coward, 6 Nov 2017 @ 12:00pm

    Not unlike government officials, CEOs and other executives can always be bought out and if needed golden-parachuted out of the way. The failed deal might indicate that T-Mobile's top brass may have been holding out for a higher payoff than Sprint-Softbank could stomach.

    reply to this | link to this | view in chronology ]

  • identicon
    Andy, 6 Nov 2017 @ 12:00pm

    Google where are you.

    Why not google, why can they not use there petty cash and purchase t-mobile outright, cut contract costs by 50% and give every contract unlimited data by simply spending around $600 000 to upgrade the network.

    Google could then spend billions on the network and become the most stable and fastest network provider.

    Imagine being able to pay $10 for unlimited data and 500 minutes a month... Google would be racking in the money when millions of people cancelled with other networks and signed up with them.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 6 Nov 2017 @ 12:49pm

      Re: Google where are you.

      Google's foray into broadband turned out to be essentially a public relations/publicity stunt, as the company has repeatedly demonstrated that it was never really serious about growing Google Fiber from a testbed into a national or regional ISP.

      The money spent (lost) bought the company a great deal of public goodwill during all those years when the promise of nationwide high speed broadband seemed just around the corner, at a time when Google was battling public concerns about the company's growing monopolistic practices.

      reply to this | link to this | view in chronology ]

  • identicon
    SirWired, 6 Nov 2017 @ 12:38pm

    Sheesh Sprint; don't you realize you suck?

    Given how terrible Sprint has been for years, I have no idea why they thought TMo would let them retain control.

    Personally, I don't think it would have made much difference competition-wise if TMo has bought Sprint, if for no other reason that Sprint isn't particularly competitive now.

    Really, turning down this merger might have long-term anti-competitive effects, because if Softbank stops throwing good money after bad, their spectrum could very well go to VzW or AT&T instead.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 6 Nov 2017 @ 1:05pm

      Re: Sheesh Sprint; don't you realize you suck?

      It matters for the tower operators, for the network authorities/government and others charging each company separately for the same services. While it is more efficient with less double-work, it is usually neither in consumer interest to reduce the number of providers or the geographical job-creation interest to do away with stable jobs you can't move to Mexico!

      reply to this | link to this | view in chronology ]

  • icon
    orbitalinsertion (profile), 6 Nov 2017 @ 1:25pm

    That's one huge sigh of relief, but i am still reality-checking to make sure i am not in a coma or some alternate universe temporarily.

    reply to this | link to this | view in chronology ]

  • identicon
    David, 6 Nov 2017 @ 3:19pm

    Good for consumers

    I think figures in the tens of billions of savings were suggested. If there was so much to be realized by sharing infrastructure, cross-deals would of course have been made. This amount of money also can't be saved on single-expense costs like research and development: it's far too high for that. It only can be saved on actual per-customer costs: only those can scale up to such amounts.

    So the intent from the start has been to give the customer worse value for their money, and the main way you can actually do that if is there is no competition interested in or allowed to filling the value gap.

    reply to this | link to this | view in chronology ]

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