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Report: T-Mobile and Sprint are finalizing plans for a merger

June 21st, 2017 at 3:32 PM
T-Mobile Sprint merger report

T-Mobile and Sprint have been flirting with the notion of a merger like a pair of coy teenagers at a high-school dance, but we’re seeing signs that something is finally going to happen. It’s a logical move for both companies: the networks would get bigger, and they wouldn’t need to have Twitter fights with each other anymore.

It would also be terrible for anyone why buys a wireless plan in the US, but that’s not stopping progress. A new report from a German newspaper says that Deutsche Telekom, T-Mobile’s owner, is preparing documents for a merger with Sprint.

Handelsblatt‘s report says that the details of the merger are reaching the final steps, and Deutsche is preparing documents for an all-stock merger agreement. Such a deal would avoid most of the usual transaction costs of a merger, as it would just involve an exchange of stock instead of cash.

A merger would likely see T-Mobile and Sprint’s networks also become as one, although that would take much longer than the merger on paper. Sprint uses CDMA technology to power its 2G network, while T-Mobile is on GSM. The two technologies are not compatible, and CDMA would likely have to be phased out (along with some customer devices) before the two networks could truly unify.

That union of networks would actually be good news for customers: although there’s a lot of overlap, the two networks combined would have much better coverage than either T-Mobile or Sprint currently. Room is also there for aggressive future expansion, as T-Mobile recently bought new spectrum from the FCC for a 5G network, and Sprint already has spectrum licenses it’s not using that could be built out.

But don’t be fooled that a merger would ultimately be a good thing: going from four to three national carriers would massively reduce competition, so things that you’re used to like cheaper cell plans and unlimited deals will quickly become a thing of the past. Losing Sprint would be particularly bad: it’s the cheapest of the four carriers, and that downwards price pressure is the only thing that forces T-Mobile to keep prices a little lower than Verizon and AT&T.

Canada provides a cautionary tale: it has only three national wireless networks and a handful of regional players, and the result (with a demographic similar to the US) is one of the most expensive cellphone industries in the world. There’s no unlimited plans, customers are still locked into multi-year contracts, and a basic plan with a few GB of data can cost upwards of $100.

There’s no indication that a T-Mobile-Sprint merger would suddenly turn the US into Canada, but it’s an awful time for competition to slow down. 5G is just around the corner, and the amount of competition cell companies currently face will dictate how fast it’s deployed and how much companies can charge. The theory says that with 5G offering more bandwidth, the cost per gigabyte of mobile data should plummet. Without competition, however, wireless companies could just pocket the savings and not pass them on to consumers.

In any case, the Sprint-T-Mobile merger still has a long way to go. A deal hasn’t officially been announced yet, and any merger would be likely to face serious scrutiny from the federal government. Normally, you’d expect the pro-industry Trump administration to ramrod a deal through, but there’s one thing to consider: jobs. A merger would undoubtedly see tens of thousands of retail jobs axed, as Sprint and T-Mobile both have nationwide store chains at the moment.

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