Wireless providers Sprint Corp. and T-Mobile U.S. Inc. have agreed to unite into one company. Provided regulators approve the merger, the combined company will join Verizon and AT&T as a dominant player in the wireless market.
Through a unification and consolidation of both Sprint and T-Mobile, the new company stands to save billions of dollars in operating expenses. The Wall Street Journal reports the deal’s terms specify the dropping of the Sprint name in favor of keeping the T-Mobile brand.
T-Mobile parent company Deutsche Telekom AG will control the merged enterprise, and T-Mobile CEO John Legere will remain in charge. Softbank of Japan, Sprint’s parent company, will keep 27 percent interest in the new company and hold four seats on the board. Company operations will be split between headquarters in Bellevue, Washington, and Overland Park, Kansas.
Falling just behind Verizon, the new T-Mobile will have over 100 million subscribers. With this much control and influence on the market, the company will face some stiff opposition from U.S. antitrust regulators.
Allowing just three major corporations to dominate wireless services may mean higher prices for consumers. Anticipating this reaction from critics of the merger, the deal’s announcement today addressed the issue by promising reduced rates, increased competition, and better quality for customers.
“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 Mr. Legere in a press release sent to the New York Times.
Despite this optimistic commitment to improving the wireless market, the company still needs to convince officials in Washington to approve such a deal. Company representatives and attorneys face a likely uphill battle with a Justice Department and Federal Communications Commission that are not typically friendly to big corporate mergers.
Late last year, AT&T was blocked by the federal government when it tried to buy out Time Warner Inc. An earlier merger attempt by Sprint and T-Mobile failed after government regulators successfully stopped the deal in 2014.
The power and money from a combined T-Mobile and Sprint could force a quicker expansion of a nationwide 5G wireless network. The improved system could provide faster, more reliable broadband speeds to mobile customers. The new organization might be in a much better position to build a 5G network before competitors AT&T and Verizon.
The T-Mobile merger essentially saves Sprint after consistently losing subscribers and acquiring billions of dollars in new debt in the past five years since Softbank took control. T-Mobile, on the other hand, has successfully gained subscribers in recent years by implementing aggressive marketing and pricing plans.
Once the merger is complete, the new T-Mobile-Sprint company will have an estimated value of $146 billion. As of the close of business on Friday, Sprint had a market value of $26 billion and T-Mobile was sitting at $55 billion.