Renewed speculation about a possible merger between Sprint and T-Mobile is caused by concerns among the mobile phone customers and consumer advocates, though some industry observers say that it may be the only way for mobile carriers to compete with the industry giants Verizon and AT&T.
A previous attempt by Sprint to buy its rival fell apart in 2014, under pressure from the Federal Communications Commission. But Wall Street and consumer advocates, believe that a deal is possible among the incoming Trump administration.
Merger speculation was fueled this week as president-elect, Donald Trump met with Masayoshi Son, the CEO of Sprint’s parent company, a Japanese conglomerate SoftBank. Trump and Masayoshi Son were all smiles after the meeting, when they announced a SoftBank promise to invest $50 billion in the United States, it is possible to create 50,000 jobs. There was no indication that any of that money would be used for the Sprint-projects.
Softbank paid more than $20 billion for Sprint in 2012. But when Sprint went after T-Mobile, the FCC essentially blocked any deal.
“Four national wireless providers are good for American consumers,” said FCC head Tom Wheeler in August 2014. “Sprint now has an opportunity to focus their efforts on robust competition.”
Earlier in 2016, Son said that he was still interested in the T-Mobile, though there is no active negotiations are announced.
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Stock investors are clearly betting the merger will get new life: After the end of the meeting, Sprint’s stock reached a 52-week high of $8.86, while T-Mobile hit a yearly high-water mark of € 55.99. (Both stocks were trending upward since the elections.)
What Customers Say
Consumer advocates have tended to look skeptically at consolidation, especially in a market as tightly concentrated as cellular, Verizon, AT&T, T-Mobile and Sprint, dwarfing all its competitors.
“With four providers is a boon for investment, consumers and the general interest,” said Michael Copps, special adviser of the guardian of the Common cause, and the FCC chairman from 2001 to 2011. “It allows two of the four providers of mobile telephony to combine would be heading in exactly the wrong direction. That was only up consumer costs and limiting the choice of the consumer. The answer is not just No, but ‘Hell no!'”
Many consumers feel the same way. We asked customers of T-Mobile about a possible merger on our Facebook page, and within a few hours, more than 100 responses. The vast majority felt that their T-Mobile service and had problems with the Sprint.
A Facebook use, summed up the feelings of many: “in the past, T-Mobile and loved them. Made the switch to Sprint to save costs. BIG mistake, it is horrible and their customer service is like talking on the sidewalk.”
Another user simply said, “This makes me want to cry.” And a third commenter wrote, “If Sprint buys T-Mobile, I’m leaving T-Mobile. I hate Sprint. Worst customer service EVER.”
These comments are in line with the results of Consumer Reports’ large annual survey on mobile services. In our most recent study, Sprint was the last of the four major carriers in satisfaction of the consumer, while T-Mobile in the first place, to take over the eternal leader Verizon. (As in the past few years, all four lagged far behind smaller carriers such as Consumer Cellular and Ting.)
The Consumer Case for a Merger
But not all observers of the mobile business think that a merger would spell trouble for consumers. Verizon and AT&T dwarf Sprint and T-Mobile, which together account for less than a third of all mobile subscribers in the United States.
Peter Jarich, chief analyst at Current Analysis, a digital technology research firm, says smaller firms find it difficult to stay afloat in the coming years.
“We have this non-stop price wars, and that is good for the consumer,” says Jarich. “But as we go forward, the question is: how difficult is it for stand-alone companies to compete with Verizon and AT&T?”
He says that a combined Sprint and T-Mobile may be better positioned to face major challenges, ranging from potential competitors in the wireless market—such as the cable companies and Google the term, the work of upgrading their networks to the next generation of the technology.
“The roll-out of 5G is not cheap,” he says.
Harold Feld, senior vice president of the advocacy group Public Knowledge, at an earlier potential merger between T-Mobile and AT&T. But now says he is a Sprint and T-Mobile deal has both advantages and disadvantages for the consumer.
“What has changed since the FCC and the Department of Justice signaled they would not look positively on a Sprint and T-Mobile going back a few years ago, is that both AT&T and Verizon have been bulking up on content,” says Feld.
Just this week, AT&T and Time Warner executives spoke at a Congressional hearing about the cellular company is planning to buy Time Warner, owner of CNN and HBO.
“For consumers, there may be an argument that it is important to have a stronger wireless company that is not connected to any other line of business—a pure mobile company—and, therefore, compete on the basis of price rather than on the product differentiators, such as zero-rating their own content,” says Feld.
Score of zero is when you are content, such as movies downloaded via a mobile network is not taken into account for the consumer data limit.
On the other hand, Sprint and T-Mobile should be a significant number of consumers with a low income and people of color who may suffer from a merger, according to Feld.
“For a number of communities we would be down by two strong competitors active approach of their company, and that is never a happy situation.”
The incoming Trump administration has sent mixed signals concerning mergers of this type. Before the election, Trump spoke out against the AT&T acquisition as well as a merger between Comcast and NBC Universal.
“We look to break that deal up and other offers like that,” he said in October. “That should never, never have approved in the first place. They try to poison the mind of the American voter.”
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