American mobile giants T-Mobile and Sprint have agreed to merge in a move which the two parties claim will improve services for customers and ensure the US maintains its leadership into the 5G era.
T-Mobile will be the senior partner in the merger, effectively purchasing its rival for $26 billion, and its CEO John Legere will head up the new combined company.
If approved, the transaction would combine the third and fourth largest operators in the US. It is likely this will attract the attention of regulators, but both companies have launched a charm offensive to claim why this will be a good thing for the market.
T-Mobile and Sprint
It claims the economies of scale will allow it to be more aggressive in the market, lowering prices and encouraging competition. Indeed, there is a pledge to invest $40 billion during the first three years after the merger.
Central to this claim is that neither Sprint nor T-Mobile has the means to build a truly national 5G network on their own, but their combined spectrum and network assets mean they will be able to this more rapidly than rivals AT&T and Verizon – both of whom have more customers and spectrum than the merged company.
This is because T-Mobile has long range 600MHz airwaves, whereas its rivals have mmWave spectrum which offers vast capacity but only within a limited radius. The two companies also assert that Verizon and AT&T would have to “kick” customers off LTE to facilitate the rollout.
“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” said Legere. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”
This nationwide 5G would not only bring benefits to customers, who would get 15 times faster speeds by 2024, but also boost the entire US mobile industry, which has enjoyed significant advantages from leading the world in 4G such as job creation.
It is unclear how receptive regulators will be to the proposals, but both parties will hope the promise of investment and increased competition will see it passed. Another claim is that half of Americans can only get high speed broadband from one provider, whereas 5G will enable fixed-wireless access (FWA) services across the USA.
“We intend to bring this same competitive disruption as we look to build the world’s best 5G network that will make the US a hotbed for innovation and will redefine the way consumers live and work across the US, including in rural America,” declared Sprint CEO Marcelo Claure, who will join the board of the new firm.
“As we do this, we will force our competitors to follow suit, as they always do, which will benefit the entire country. I am confident this combination will spur job creation and ensure opportunities for Sprint employees as part of a larger, stronger combined organization, and I am thrilled that Kansas City will be a second headquarters for the merged company.”