T-Mobile and Sprint are coming together in a huge mega-merger that’s all about 5G.
The rumors and speculation swirling for years are fomenting into a dust cloud of money. T-Mobile and Sprint, the third and fourth-largest carriers in the U.S., respectively, are poised to form a single entity in a $26.5 billion merger that would put the united company in a close third position behind AT&T with just over 70 million postpaid subscribers.
The companies announced the deal mid-day Sunday with a slick webpage called All for 5G, highlighting the ways in which the merged corporation will focus on next-generation wireless technologies more effectively against the competition.
Should the deal be approved by U.S. regulators — a tall order in an environment that has discouraged M&A between intra-industry entities — the New T-Mobile, as the companies are referring to it — T-Mobile’s parent company, Germany’s Deutsche Telekom, would own a 42% stake and seat nine board members, while Sprint’s parent Softbank would have a 27% stake and four board members.
According to Bloomberg, which broke the story, SoftBank CEO Masayoshi Son will have a seat on the board.
On its merger marketing page, Sprint and T-Mobile promise that the New T-Mobile will keep prices low, offer outstanding service, and provide more competition, with “a MAJOR expansion of competition into rural markets and for businesses of all sizes!” Critics point to markets like Canada where just three well-entrenched wireless carriers have less reason to compete, forcing prices up and suppressing consumer choice.
According to a press release co-issued by the companies, the combined company will have a $146 billion market capitalization, with Sprint’s $59 billion number based on the $6.62 closing share price as of Friday, April 27. Officially, the new company will be called T-Mobile —the Sprint brand will disappear — and will have “expected run rate cost synergies of $6+ billion” compared to the two companies operating on their own.
The combined company will have lower costs, greater economies of scale, and the resources to provide U.S. consumers and businesses with lower prices, better quality, unmatched value, and greater competition. The New T-Mobile will employ more people than both companies separately and create thousands of new American jobs.
Current T-Mobile CEO, John Legere, will remain chief executive of the new company, while current T-Mobile COO, Mike Sievert, will retain that position at the New T-Mobile while also acting as President of the combined entity. Immediately following the merger, the New T-Mobile will hire thousands of new employees to fill retail, call center, and network infrastructure roles, according to the executive team, with investments of $40 billion in the combined network. While Verizon and AT&T will each still hold considerably more spectrum than even the combined Sprint-Tmo, Sprint’s cache of unused 2.5GHz spectrum will be critical to migrating its customers to T-Mobile’s LTE network, and will allow both companies to deploy low-band 5G more easily when the opportunity arises in 2019 and beyond.
T-Mobile and Sprint believe that the merger is perfectly timed, since cable companies like Comcast and Charter are poised to enter the wireless market, either as MVNOs or, later, as infrastructure owners of their own networks. While that hypothesis has yet to be proven, Sprint and T-Mobile believe that there is more competition in the market today than ever before, and the combined entity will be able to compete better on the network and content side.
At the same time, with the recent end of Net Neutrality in the U.S., both companies believe that they are in a good position to eke out as much profit per consumer as possible with a diverse selection of plans that may be able to take advantage of the availability of slow and fast lanes that weren’t possible during the previous administration.
According to the companies, all of 54.6 million Sprint’s customers will be migrated to T-Mobile’s network within three years, and over 20 million Sprint customers already have phones that are compatible with T-Mobile’s.