Home / Business / Sprint and T-Mobile to Merge, in Bid to Remake Wireless Market

Sprint and T-Mobile to Merge, in Bid to Remake Wireless Market

A combined T-Mobile and Sprint, with almost 100 million retail subscribers as of Dec. 31, would put it ahead of AT&T, with 93.6 million, and not far behind Verizon’s 116.3 million. (Or, as the colorful Mr. Legere put it, the transaction would help it better compete against the companies that he has previously referred to as “dumb and dumber.”)

It is unclear how hard Verizon and AT&T will try to fight the deal, if they will at all. A spokesman for AT&T declined to comment, while a spokesman for Verizon said in a statement that it was focused on building its own 5G network, “not just a proposal that may or may not happen in the next couple of years.”

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Inside the Sprint store at Flatiron Building in Manhattan. The merger announcement on Sunday takes a step toward fulfilling a long-frustrated dream of Sprint’s owner, the Japanese billionaire Masayoshi Son.

Credit
Jeenah Moon for The New York Times

For the moment, consumers are unlikely to see much change, apart from an agreement by Sprint and T-Mobile that customers of either company could use the other company’s network. Until the deal is completed, which the carriers said they hoped would be by July of next year, they must continue to compete. That means they could potentially be adversaries in a government-run auction of 5G network airwaves, known as spectrum, that is scheduled to begin this fall.

Some Democratic lawmakers quickly questioned the merits of the deal. Senator Amy Klobuchar of Minnesota said in a statement, “I remain concerned that increased consolidation could undermine benefits to consumers.” But Gov. Jay Inslee, a Democrat from T-Mobile’s home state of Washington, tweeted that he welcomed the news of potential job creation.

T-Mobile and Sprint contend that the market looks different than it did when they last tried to combine in 2014. The need to build out 5G requires tens of billions of dollars in investments that T-Mobile and Sprint, especially, would be hard-pressed to put up on their own. And there are fresh competitors in the sector. Comcast, for example, has quickly drawn hundreds of thousands of wireless service customers by bundling mobile phones with their cable plans, even if it loses the company money.

A huge part of T-Mobile and Sprint’s push is emphasizing the future of 5G. Proponents say the superfast wireless standard would not only make downloading movies faster, but underpin huge advances in autonomous vehicles, internet-connected devices and more.

The White House has declared 5G wireless a vital national priority. In March, the Trump administration blocked a hostile bid by Singapore-based Broadcom for San Diego-based Qualcomm, citing national security concerns. Some analysts questioned whether the predominantly foreign ownership of the combined company — including SoftBank, which has business ties to Chinese companies like Huawei — poses possible national security risks.

Investing in new 5G networks as separate companies would be difficult for T-Mobile and Sprint, given their current financial situations. Sprint has about $32 billion in debt on its books, while T-Mobile generates a fraction of the cash that Verizon and AT&T do. But combining would yield some $6 billion in cost savings, especially because the companies would need to pay to run just one network instead of two, allowing them to spend more money on infrastructure.

“We can change the nature of the curve in the way the U.S. and others are investing in 5G,” Mr. Legere said in the interview. He added that he shared worries “that the U.S. is on the verge of losing the leadership it has attained” in 5G.

For consumer advocates, however, the chief worry is that a shrinking number of providers would bring an end to the innovations that T-Mobile introduced to the American wireless market since the Justice Department blocked its plan to sell itself to AT&T in 2011. Under Mr. Legere, T-Mobile cut prices, ended long-term contract requirements and promised to simplify customer bills by eliminating hidden fees and surprise taxes.

Those policies helped T-Mobile add nearly 40 million customers over the last five years, with 5 million new customers added last year alone. AT&T, Verizon and Sprint all followed suit, and in recent years the overall price of basic wireless plans has stayed flat or fallen, according to Obama-era regulators.

“The success of the four-firm market is proven for consumers in lower prices and better offerings,” said Tom Wheeler, who was the chairman of the F.C.C. when he opposed a merger between Sprint and T-Mobile in 2014. “It is hard to see how removing the competition that created improves things for consumers.”

His successor atop the F.C.C., Ajit Pai, has indicated that he is more open to letting companies join together. He has said that he was not wedded to an ideal number of wireless carriers in the market, and that his job is to approach his analysis with “humility” and an open mind.

The Trump-appointed antitrust chief at the Justice Department, Makan Delrahim, is more of a wild card, having shown concern about antitrust violations in the telecommunications industry. His team has sued to block AT&T’s bid for Time Warner, arguing that it would force consumers to pay more for content like CNN and HBO. He has also opened an investigation into allegations that Verizon and AT&T had made it difficult for consumers to switch to another provider.

And many of the Justice Department’s antitrust staff members are holdovers from 2014, when Mr. Delrahim’s predecessor also opposed Sprint and T-Mobile’s first attempt to merge. Representatives of the F.C.C. and the Justice Department declined to comment.

But the analyst Craig Moffett of the research firm MoffettNathanson said the issue of what is best for consumers is not merely a question of numbers.

“Is it lower prices,” he asked, “or more availability of advanced consumer technology?”

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News credit : Nytimes