The deal, which would cost billions of dollars, still must pass regulatory scrutiny.
Building a slide deck, pitch, or presentation? Here are the big takeaways:
- T-Mobile and Sprint combined would be well-positioned to roll out a nationwide 5G network without impacting current 4G LTE deployments.
- The deal, which requires regulatory approval, is the result of 5 years of intermittent negotiation for the two carriers to merge.
On Sunday, T-Mobile formally announced a finalized plan for the combining of the third- and fourth-largest mobile network operators in the United States. According to the plan, T-Mobile US will acquire Sprint, in a deal that gives Deutsche Telekom 42%, and Softbank 27%, with the remaining 31% of the company as publicly traded stock.
The two companies combined have 127.6 million subscribers, which is still well behind Verizon at 162.3 million, and AT&T at 141.6 million, according to a Fierce Wireless/Recon Analytics report. These figures include prepaid and postpaid subscribers, as well as wholesale/corporate subscriptions and Internet of Things (IoT) device subscriptions.
The companies' rationale behind this merger centers around the unique position that T-Mobile and Sprint occupy in terms of 5G spectrum rights in the United States. Sprint owns a large amount of 800 MHz and 2.5 GHz spectrum, which gives the company a decent amount of room to grow LTE and 5G NR deployments. Similarly, T-Mobile has been actively deploying "Extended Range LTE" on the 600 MHz spectrum (LTE Band 71), which is also a useful spectrum for 5G NR.
T-Mobile's announcement states that "Neither company standing alone can create a nationwide 5G network with the breadth and depth required to fuel the next wave of mobile Internet innovation," adding that "Neither can AT&T and Verizon in the near term, even though they will still respectively own 34% and 172% more spectrum than the combined company."
There is a compelling point here. Wireless spectrum is in some sense a finite resource, and the spectrum rights--and current network deployments--of the mobile carriers is a concern. As T-Mobile's statement notes, the spectrum holdings of AT&T and Verizon, which are centered around 4G frequencies and "millimeter wave" bands, have a more limited use for 5G. This requires those companies to use transitional technologies such as 256-QAM, which is not true 5G, or decommission existing 4G deployments to free up their spectrum for 5G, which would adversely impact current users.
The alternative is to deploy 5G on millimeter wave bands, which allow for faster data speeds, with substantial drawbacks. Because of the physical limitations of millimeter wave communications, this requires deploying more base stations to compensate for the shorter range. While this would be advantageous in certain use cases, such as densely-populated places, as well as arenas and stadiums, it would be a poor fit for use in rural areas. Additionally, millimeter wave communication is susceptible to atmospheric interference, particularly during storms.
SEE: Mobile device computing policy (Tech Pro Research)
The acceleration of true 5G would also help businesses further realize their digital transformation plans. The low latency of 5G will make technologies like cloud storage even more useful in day-to-day operations, while mobile and IoT initiatives will also benefit from improved connectivity and faster speeds.
The deal, which must still pass regulatory scrutiny, would provide a certain future for the two mobile carriers. Deutsche Telekom has treated T-Mobile US as something of a hot potato, as the company had courted offers for buyouts by AT&T in 2011, as well as Iliad SA--the operators of the French telecom Free Mobile--in 2014, and to Comcast in 2015. Sprint's parent company Softbank had previously planned to acquire T-Mobile in 2013-2014, though this deal was abandoned under the expectation that approval by regulators under the Obama administration was unlikely. Similar negotiations in 2017 were abandoned due to Softbank's board wanting to control the combined Sprint/T-Mobile company.
How this plan will fare under the Trump administration is unknown. A proposed merger between AT&T and Time Warner has been encumbered by a lawsuit from the Department of Justice, which AT&T alleges was filed due to Trump's personal criticism of the company. Similarly, Trump single handedly killed Broadcom's attempt at a hostile takeover of Qualcomm, citing national security concerns relating to Broadcom's Singaporean corporate lineage.
The number of mobile carriers in the United States has decreased significantly over the last decade. In 2013, Sprint acquired the WiMAX network operator ClearWire to bolster spectrum holdings, while T-Mobile acquired MetroPCS, and AT&T and Verizon divvied up the last of the assets of Alltel. The following year, AT&T acquired the parent company of Cricket, alongside a handful of regional mobile network operators primarily in the Midwest. If the T-Mobile/Sprint merger is approved, it would make Chicago-based U.S. Cellular, which serves 5 million customers in 23 states, the fourth largest mobile carrier in the United States.
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- The T-Mobile and Sprint merger: The numbers and assumptions you need to know (ZDNet)
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