The Competition-Killing Sprint, T-Mobile Merger Nobody Asked For Is Back On The Menu

from the M&A-mania dept

When last we checked in with T-Mobile and Sprint's longstanding M&A dance of dysfunction, the deal had been scuttled after Sprint was unwilling to give up control post-merger. But something in the dynamic between the two companies (more specifically T-Mobile's German owner Deutsche Telekom and Sprint's Japanese owner Softbank) appears to have shifted, and the deal nobody actually asked for appears to be back on the menu (annoying Wall Street Journal paywall warning):

"Sprint and T-Mobile have rekindled merger talks, people familiar with the matter said, as the wireless rivals explore a combination for the third time in four years. The latest discussions come just five months after a previous courtship collapsed largely over who would control the combined firm. The talks also come in the midst of an antitrust fight between the U.S. government and AT&T Inc.

T-Mobile and its more consumer friendly brand identity have widely been seen as a good thing for the industry (even though T-Mobile's brand schtick doesn't extend to things like net neutrality). The company's "innovative" focus on actually listening to consumers once in a while has resulted in a lot of notable improvements in the industry as other carriers play copycat, including more reasonable roaming costs, the elimination of long-term contracts, and a modest reduction in the tendency to nickel and dime consumers to death with obnoxious hidden fees.

Sprint, meanwhile, has languished in a sort of brand identity hell, with most of its efforts to counter T-Mobile and resonate with consumers going nowhere. While improving slowly, Sprint pretty consistently rates last in terms of overall network quality and performance among the big four carriers, and it seems like the company has been stuck for years promising the network everybody actually wants is just around the next corner. Meanwhile despite a wealthy sugar daddy in Softbank, Sprint's debt load continues to hamstring the company's efforts at improvement.

The argument has long been that combining the two companies will create a more effective competitor for AT&T and Verizon. But that's generally not how competition, or the telecom sector, works. Reducing the total number of competitors almost always results in less incentive to compete. Even with T-Mobile's disruptive habits, the wireless sector already doesn't really try too hard to seriously compete on price. And part of the reason Sprint and T-Mobile have struggled is AT&T and Verizon's monopoly dominance of fiber-based cellular backhaul, something that won't change just because of M&A mania.

As they hunt for possible regulatory approval, Sprint and T-Mobile have previously tried to play on Donald Trump's facts-optional job creation claims, insisting the deal will somehow, magically, be a boon for employment. But analysts that rely on actual facts and hard data (remember them?) have argued the deal will be mammoth job killer:

"Together, the companies reported employing 78,000 in their most recent disclosures. Sprint, based in suburban Kansas City, accounts for 28,000 of those, and T-Mobile for 50,000. Merging the companies, said a report by Jonathan Chaplin of New Street Research, could eliminate “approximately 30,000 American jobs” — which is more than Sprint employs.

"Synergies," indeed.

Companies: sprint, t-mobile

Reader Comments

Subscribe: RSS

View by: Time | Thread

  1. icon
    Richard Bennett (profile), 2 May 2018 @ 11:56am

    Re: Bode is hilarious

    Bode claims: "And part of the reason Sprint and T-Mobile have struggled is AT&T and Verizon's monopoly dominance of fiber-based cellular backhaul, something that won't change just because of M&A mania."

    This is a big pile of hooey, of course. Sprint has a big pile of fiber assets that it's not using because it has so few customers and so little ability to invest in the wireless edge. TMUS has customers but its fiber backhaul is weak.

    So a combination of the two companies produces a genuine rival to the two companies that currently have 80% of the market. Bode's math - 4 > 3 - misses the fact that three firms with a third of the market each is much more competitive than the status quo.

Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here

Subscribe to the Techdirt Daily newsletter

Comment Options:

  • Use markdown for basic formatting. (HTML is not supported.)
  • Remember name/email/url (set a cookie)

Follow Techdirt
Insider Shop - Show Your Support!

Report this ad  |  Hide Techdirt ads
Essential Reading
Techdirt Deals
Report this ad  |  Hide Techdirt ads
Techdirt Insider Chat
Report this ad  |  Hide Techdirt ads
Recent Stories
Report this ad  |  Hide Techdirt ads


Email This

This feature is only available to registered users. Register or sign in to use it.