America’s third and fourth biggest mobile network companies, Sprint and T-Mobile, have been talking again about the possibility of a merger, now for the second time since last November.
Now, T-Mobile is about to seal the deal again with Sprint to acquire it for $6.50 per share, or $26 billion in total, and will likely have T-Mobile's John Legere to run this new company. SoftBank, who owns more than 85% of Sprint, will own just 30 percent of the merger, while Deutsche Telekom, who owns about 60% of T-Mobile, would own about 42 percent.
Talks had been called off last year after SoftBank CEO Masayoshi Son decided he didn't want to lose control of a combined company, as well as after concerns of the potential inability of reaching a general consensus, and thus losing competition against bigger competitors like Verizon and AT&T.
However, several changes have been evident in the past months that have made Son accept a lower share. Lower corporate taxes from the federal government, 5G deployment transparency, and a changing wireless landscape that now includes cable providers. In the past few years, Sprint has acquired $32 billion in debt and lost millions of users since it was taken over by SoftBank, and T-Mobile is generating a mere fraction of Verizon’s and AT&T’s.
If this deal goes through, a new mobile giant with over 127 million active customers will emerge, large enough to challenge Verizon, or even AT&T, who despite federal interventions in the late 1900s, still holds a huge chunk of the market. To users, this could bring about some bad news. With the merge of these two companies, they are now more evenly faced against the industry’s other two leaders, meaning they don’t need to offer as competitive prices and products to stay in the game anymore. This could result in drops in quality service, or less promotions/deals.
Others are contemplating the possibility in which this highly saturated market is taken by a new triopoly, now with the third and fourth biggest companies becoming one, reducing the number of competitors. The US Federal Communications Commission made its point when it sued (and won) AT&T after an attempt to buy T-Mobile back in 2011, and with the final decision being in the hands of government authorities, it will take a while to become official even after the merger deal passes from both of the companies themselves.
Derek Liu is an experienced cryptocurrency and stock trader with a background in finance. He follows and writes about controversial economic topics and American politics. Other than a writer, he is also an ambassador for multiple other student led economics and leadership clubs, such as Target Alpha and PUYO, and a grade ten student at St.Roberts CHS.