T-Mobile and Sprint plan merger to keep up with rivals

Communications titans Sprint and T-Mobile have agreed to unite under a deal valuing the new combined company at $146bn.

The new entity, which will be led by T-Mobile chief executive John Legere and operate under the T-Mobile name, will have 127m wireless customers, making it a similar sized competitor to the top US wireless internet providers AT&T and Verizon Communications.

“As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf,” said Legere.

Despite this emphasis on positive change, the Communications Workers of America, a union for telecommunication workers, said the merger will cost at least 20,000 US jobs and reduce competition in the wireless internet market.

The two companies referred to the emergence of cable mobile virtual network operators as boosting competition, though MVNOs do not own network infrastructure and have not hitherto been considered a factor in US competition inquiries. T-Mobile and Sprint could sell some spectrum to foster the creation of a fourth competitor.

The proposed all-stock deal values T-Mobile at $87bn and Sprint, which is owned by Japanese company SoftBank, at $59bn and is the latest of a number of attempts to merge the two companies.

A previous bid from Sprint was dropped after the Obama administration raised concerns about competition, while a deal to combine the two companies last October was called off as well.

The companies are targeting regulatory approval by the end of the first quarter 2019, with both the Federal Communications Commission, the Department of Justice and state public utilities commissions all needing to give green lights.

Analysts at RBC Capital Markets said they believed the likelihood of a Sprint/T-Mobile deal approval is "less than 50%" based on criteria they believe the DOJ would apply around industry structure and the resulting sector concentration.

"We believe DOJ staff feel vindicated in blocking the AT&T/T-Mobile merger several years ago and would want to maintain a four-player market to preserve competitive behavior, whereas a three-player market may be susceptible to coordinated effects. T-Mobile will make the argument that the deal will create more jobs, particularly in rural areas, and foster U.S. leadership and innovation in "5G".