T-Mobile, operated by Germany’s Deutsche Telekom, and Sprint, controlled by SoftBank, announced a $26.8 billion merger deal on Sunday. The world’s third and fourth largest wireless carriers will create a new telecommunications giant which would cause a dramatic impact in the US telecom industry.
The combined company would keep the T-Mobile name and be run by the current T-Mobile CEO John Legere. It will have more than 100 million subscribers and its network capacity is 30 times faster than it does today.
T-Mobile and Sprint will merge to create the next generation of ultra-fast wireless technology, called 5G. This will challenge Verizon and AT&T, the world’s wireless market leaders. The building of 5G network would offer thousands of jobs and open hundreds of new stores, particularly in rural areas.
The White House has declared 5G wireless a vital national priority. The company’s merging is a good move, giving them $6 billion in cost savings. This will allow them to spend more money on infrastructure. Developing 5G network as separate companies would be difficult. Sprint has $32 billion in debt, while T-Mobile produces only a fraction of cash compared to Verizon and AT&T.
Legere said, “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.”
“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,” he added.
The Federal Communications Commission and the US Department of Justice still need to approve the deal. Both have been a wall to such mergers in the past.
Both Sprint and T-Mobile tried to merge before in 2014. However, it turned out unsuccessful as regulators in Obama administration blocked the deal. According to the administration, the merging of the two companies would give consumers fewer choices and lead to higher prices.
Four to Three
According to the Federal officials, consumers are best served when there are at least four national wireless providers instead of three.
Legere said, “What Sprint has done, what T-Mobile has done to drive competition—we plan on supercharging it.”
Legere believes the notion that competition will lessen with the drop from four wireless competitors to three is “archaic” thinking. Companies such as Comcast are moving into space, and have added more customers that AT&T and Verizon combined. In other words, the fight for customers is not for the best wireless plan, but whether a carrier can also offer television and broadband, as well.
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