Long-time U.S. carriers Sprint and T-Mobile merge. Such moves by large companies are not always guaranteed in the United States, but there is every indication that this will remove regulatory barriers from the federal government and that the country’s wireless industry will be further consolidated.
This morning T-Mobile and Sprint Announce Final Details of Merger Approved by the two companies and their investors, with the new commercial entity simply known as T-Mobile. With immediate effect, Sprint will cease trading on the New York Stock Exchange.
What does this mean for you if you are a Sprint or T-Mobile customer? At this point we cannot say for sure. But based on the initial announcement from T-Mobile and combined decades of US wireless news coverage, we think we can be pretty confident in how it will turn out, at least on the consumer side.
A quick history lesson
Sprint and T-Mobile have long been trying to merge, both with each other and with other U.S. carriers. If you don’t care, well, I can’t really blame you. Don’t hesitate to go to the next section.
T-Mobile US dates back to the late 1990s as an independent company called VoiceStream, which was created out of a division of Western Wireless. Deutsche Telekom of Germany (which is what Europeans think when you say “T-Mobile”) bought the business and changed brands in 2001 with its familiar magenta identity.
Sprint is much older, at least technically, with roots in old-fashioned American telephone service dating back to the early 20th century. The Sprint brand was born in 1982, when GTE bought Southern Pacific Communications from its parent company, the famous railroad. (Yes, this railway!) After a few mergers and acquisitions, Sprint became independent in the late 1980s and began offering cellular services in the mid-1990s, but quickly abandoned its cellular business and sold it to a competitor. The still functioning network is in fact the company’s second attempt, launched in 1995 after the acquisition of broadband wireless spectrum.
In the late 1990s and 2000s, the two companies would buy, merge, and move into various other companies in the booming telecommunications industry, the big news for Sprint being a costly merger with Nextel. It was something of a mess in terms of business, leaving Sprint’s coffers exhausted. The company still occupied a very firm fourth place on the American market.
Faced with increased competition from an emerging AT&T and Verizon duopoly, Deutsche Telekom attempted to sell the US version of T-Mobile to AT&T in 2011. The deal was ready, but the Justice Department, under a less business-friendly Obama administration, did not allow the sale. As a condition of entering into the agreement, AT&T had to pay billions of dollars to T-Mobile and cede huge swathes of wireless spectrum. Around the same time, Japanese telecommunications giant SoftBank has acquired a struggling Sprint, beating the satellite TV provider DISH Network in a bidding war in 2013.
This has left the two companies in the shape you will recognize today. Since the failed merger with AT&T, T-Mobile has been posing as the “non-carrier” offering customer rewards programs and innovative contractless service and zero-rate phone loans that are now standard in the United States. The company has aggressively expanded its network, but is still not as large as AT&T or Verizon. Sprint opted for an older and less reliable network, its old dependence on CDMA technology until recently prevented it from selecting a phone.
Deutsche Telecom and Softbank have been looking for other companies to buy or otherwise split T-Mobile and Sprint more or less continuously. The Sprint-T-Mobile merger in progress has been under construction since 2017 (although there have been efforts before that), aided by a more pro-business Justice Department under Trump and a less monopoly theoretical result. The DoJ gave preliminary approval of this merger in 2019.
As of today, a combined Sprint-T-Mobile would hold approximately 30% of the US wireless market, which is roughly equivalent to Verizon and slightly behind 40% of AT&T. A market with three major competitors is more likely to be approved by regulators than two.
Consolidation means higher prices…
With smaller and less reliable networks, Sprint and T-Mobile are both positioning themselves as the “economical” service option, at least among the big four in the United States. With their powers and customers combined, T-Mobile is likely to raise prices because AT&T and Verizon appear to be smaller giants, and the various low-budget MVNO networks pose less threat to its results.
According to the final announcement of the T-Mobile merger, this will not happen for a while, at least not for everyone. “The new T-Mobile is committed to providing the same or better rate plans for three years, which includes access to 5G, including for prepaid and LifeLine customers.” Note the language here: nothing is said about current Sprint users or those of subsidiaries of one or the other company, such as Metro and Boost Mobile. This statement leaves a lot of leeway for the combined T-Mobile to seek new profit lines.
It will likely be frustrating for customers. For the moment, Sprint and T-Mobile occupy a happy medium, with more support and telephone options than the more economical operators while offering prices lower than AT&T and Verizon. The combined company will likely retain the old strength (although support and sales will necessarily be stifled as the companies consolidate) while increasing prices for services.
Thus, the monthly prices for services will eventually increase, which is even easier now that more customers are without a contract that locks them into lower prices for years at a time. But competition will not disappear completely among the “big three”. Expect T-Mobile to continue offering more tempting deals on new phones to attract new customers. This strategy only gets easier as flagship smartphones always exceed the $ 1,000 mark.
… But less headache than you think
The last time a merger of this size occurred in the U.S. market was when the old Cingular acquired what was left of AT&T Wireless, then was swallowed up by SBC and became the AT&T now consolidated in the mid-2000s. (Jesus Christ, wireless mergers and acquisitions are complicated.) But a more relevant model is probably when T-Mobile acquired the smallest MetroPCS in 2013.
During this merger, GSM-based T-Mobile had to integrate Metro’s CDMA network, a problem because the two networks use different and incompatible standards. Thanks to the rise of LTE based on GSM, it was not so serious: the new telephone radios could manage the GSM and CDMA networks with the same confidence. Sprint’s network was entirely CDMA, but thanks to the industry wide shift to LTE, his phones already work well with GSM networks.
T-Mobile finally renamed MetroPCS to its own economic brand, now “Metro by T-Mobile”. Everything indicates that the same thing will happen here: the final announcement of the merger comes directly from T-Mobile, which indicates that the company resulting from the combination will only use the T-Mobile brand. Much has been said about the “carrier revolution”, with almost no mention of Sprint’s accomplishments as they are. It seems that the Sprint brand will no longer exist.
So the most likely change for T-Mobile customers is a reshuffle of wireless plan options, as happens from time to time. The same goes for existing Sprint customers, the only major change being the company name at the top of their wireless bill. Some headaches can occur when the old infrastructure changes, such as migrating to a new website to manage your wireless account, but T-Mobile has already handled this and is well placed to do so again.
A boost in home Internet service
The announcement of the T-Mobile merger makes ambitious goals for the company combined with the assets of Sprint. Notably, T-Mobile says it will have fourteen times wireless capacity, fifteen times wireless speed and 99% population coverage with 5G access in six years.
T-Mobile has also confirmed what many industry analysts have predicted: this broad deployment of broadband wireless services will position itself as an alternative to conventional home Internet services, such as DSL, cable and fiber optics. In technical terms, this is certainly plausible – the current 5G service cannot match the full power speed of the fiber, but if customers can get more than 100 Mbps, most likely will not care about the difference.
AT&T, with its subsidiaries combining wireless, television and Internet at home, is already leading the way here. Expect T-Mobile to offer discounts and other incentives to customers to combine wireless and home Internet under the same bill. This can be particularly attractive to rural customers who have been sorely underserved by American home Internet providers. T-Mobile has specifically stated that it plans to offer speeds of 50 Mbps to 90% of the country’s rural population.
No, you don’t need a new phone yet
Can you keep your current phone? Absolutely. First, keep in mind that a billion dollar business merger does not happen overnight and that the T-Mobile handset will not emerge in a final form for two to five years . So chances are your current phone isn’t even a factor when this happens.
As the two companies consolidate, plans will take effect, which means that new phones purchased for either network will work on both and continue to work as the networks combine. You will likely see many changes on the customer service side – payment portals and unknown apps, for example. But the majority of new phones purchased during the transition period will be purchased or even built with this upcoming change in mind.
The only victims are probably cheap low-cost phones used by customers who don’t care about Android or iOS, but these phones are so cheap to replace that the problems will be minimal anyway.
5G is another matter. As with the initial deployment of LTE, different 5G wireless bands and radio standards are already a confusing mess. But with Sprint and T-Mobile both looking to the future, and with high frequency and low 5G coverage requiring slow deployment anyway, things are a little different this time around.
Simply put, by the time most people are in the market for a new 5G phone, the new T-Mobile company will have at least one plan in place to ensure that it uses only one standard nationwide . Whether you can actually take advantage of the new company’s 5G service will likely depend on where you live; densely populated urban areas are given priority, with rural customers much later than usual.