Something interesting happened when T-Mobile and Sprint filed their intention to merge with the FCC. They said a merger would strengthen them and let them compete head to head with competitors like AT&T Mobility and Verizon Wireless. But wait. I thought they already were successfully competing. So, are they, or aren’t they?
The truth is somewhere in the blurry middle. Over the last five years, both T-Mobile and Sprint have gone through major changes. Five years ago, both of them were smaller and insignificant competitors in the wireless industry.
CEO John Legere saved T-Mobile
Then John Legere was brought in as CEO of T-Mobile and things started to change. When he stepped in, the company was crashing and burning. It missed the changeover from 2G to 3G and they were suffering because of that judgement call.
Legere set the company on an immediate upgrade. They skipped over the 3G hurdle and went right to 4G. He created the image of a smaller competitor getting back on track. It took years for the company to improve its network to the current level. But they have done a good job and had success over the last several years.
Sprint has lots of wireless data spectrum
Sprint was also struggling. Masayoshi Son, CEO of Softbank acquired the majority of Sprint. He is very successful in Japan and wants to expand his reach to the USA. His intention after acquiring Sprint was to also acquire T-Mobile, but US regulators made it clear that would not happen at that time.
Next, Masayoshi Son hired Marcelo Claure to be CEO of Sprint and the company spent the last several years trying to compete in the US. They have had a few high points which led us to think they were turning the ship around, but they simply could not catch the long-term growth wave they were chasing.
However, Sprint does own lots of wireless data spectrum, which is like gold in the wireless industry.
Bottom line, T-Mobile is a great marketer, but has very little spectrum. Sprint is not a great marketer but has loads of spectrum.
That’s why these two companies think merging makes sense. They would roll marketing and spectrum together and create an effective third place competitor.
T-Mobile, Sprint merger would combine marketing and spectrum
That makes sense. So, why should regulators let them merge?
Simple. If they don’t merge, as the industry moves ahead into the new 5G future, the industry would have four competitors. Two strong and two weak. AT&T and Verizon compared to T-Mobile and Sprint.
If they do merge, the industry will have three competitors, but they would all be strong. I know regulators would prefer to have four competitors. That made sense five or ten years ago when the wireless industry was a different place.
5G is main reason T-Mobile, Sprint merger makes sense
Today the move to 5G is expensive and unstoppable. We need as many viable competitors as we can get going forward. As much as both T-Mobile and Sprint have improved over the last several years, they are not in a strong position for the transformation to the coming 5G world.
What about all the bluster over the last five years coming from T-Mobile about how they were a rapidly growing giant who is taking no prisoners? Well, that’s just marketing talk. The truth is, they have been growing and are much stronger today than ever before, but they are not ready for the move to 5G on their own.
If we were not moving from 4G to 5G, the need to merge would not be as great. However, it’s that move to 5G that is the whole point. Neither T-Mobile or Sprint have the size or scope to remain a competitive force going forward if they do not come together.
Coming together will mean there will be three strong competitors in the wireless industry. Three strong companies are better than two strong and two weak competitors. That makes the most sense for the industry.
Wireless changing with Project Fi, Xfinity Mobile, Spectrum Mobile, Altice Mobile
Today, there are also more competitors, and even more are joining. Google Project Fi and Comcast Xfinity Mobile are already in the marketplace. Next will be Charter Spectrum Mobile and next year Altice Mobile. Plus, I expect even more companies will enter this space.
So, the wireless industry is strong and getting stronger all the time. And we want to continue to have all the competitors actively battling in the marketplace. Throwing a wrench into the mix is not in anyone’s best interest.
Deciding whether to approve a merger or not is a complex decision. I would say, based on what I hear so far, it makes sense that these two companies get together. If there are any competitive concerns, they can be addressed during the process.
Wireless is the center of the universe moving forward. We want to continue to let the industry grow and transform as it always has done. In the case of T-Mobile and Sprint, the move to 5G is the main reason to let these two companies merge. It will be better for them and it will be better for the marketplace to have three strong competitors rather than two strong and two weak ones.
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