Sprint and T-Mobile announced Sunday that they had reached a deal to merge, moving to create a new telecommunications giant — and betting that regulators will finally allow the US wireless market to shrink to just three national players.
A combined company, they said, would have more than 100 million subscribers — and the resources to build out a next-generation wireless network and challenge the longtime market leaders, Verizon and AT&T.
Sprint and T-Mobile also said the merged company — which would keep the T-Mobile name and be run by T-Mobile’s chief executive, John Legere — would create thousands of jobs by building out that next-generation network and opening hundreds of new stores in rural areas.
But for consumer advocates and regulators, the big question is this: Will there be enough competition with one fewer national wireless carrier?
Sprint and T-Mobile have tried unsuccessfully to merge before. They were effectively blocked four years ago by regulators in president Barack Obama’s administration who worried that shrinking the market for wireless providers would give consumers fewer choices and lead to higher prices.
This time, the two companies have a very specific message for the Trump administration. A combination, they argue, would allow them to create a better so-called 5G network than either company could alone, at a time when the White House views a 5G wireless network as crucial for the country’s economic and national security.
“Going from 4G to 5G is like going from black-and-white to color TV,” said Marcelo Claure, Sprint’s chief executive, in the news release. “It’s a seismic shift — one that only the combined company can unlock nationwide to fuel the next wave of mobile innovation.”
Putting together the country’s third- and fourth-largest mobile service providers would be one of the most significant consolidations in the US wireless market in years. A combined T-Mobile and Sprint, with almost 100 million retail subscribers as of Dec. 31, would put it ahead of AT&T, with 93.6 million, and not far behind Verizon’s 116.3 million.
The heads of the two companies acknowledged that winning over regulators was a top priority. In an interview, Legere said that he and Claure planned to head to Washington this week. Legere added that they did not try to “pre-sell” the transaction, although they said they had called officials at the Federal Communications Commission and the Justice Department to inform them of the agreement before it was officially announced.
It is unclear how hard Verizon and AT&T will try to fight the deal, if they will at all. A spokesman for AT&T declined to comment, while a spokesman for Verizon said in a statement that it was focused on building its own 5G network, “not just a proposal that may or may not happen in the next couple of years.”
For the moment, consumers are unlikely to see much change, apart from an agreement by Sprint and T-Mobile that customers of either company could use the other company’s network. Until the deal is completed, which the carriers said they hoped would be by July of next year, they must continue to compete. That means they could potentially be adversaries in a government-run auction of 5G network airwaves, known as spectrum, that is scheduled to begin this fall.
Under the terms of the deal — the companies described it as a merger but T-Mobile would effectively be buying Sprint for about $26.5 billion — T-Mobile’s controlling shareholder, Deutsche Telekom, would own 42 percent of the combined company. Claure would join its board. SoftBank of Japan, which controls Sprint and whose founder, Masayoshi Son, has long dreamed of merging the two carriers, would own 27 percent. Public shareholders would own the remainder.
“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,” Legere said in a joint news release.
And thanks to the recent tax cuts, the companies said, they would have the financial means to keep prices low for their consumers.
Yet the companies must overcome myriad political hurdles — including consumers’ heightened skepticism about the rapid pace of consolidation in the media and telecom industries. From President Trump to Senator Elizabeth Warren of Massachusetts, policymakers recently have sounded off against these deals and may train their fire soon on T-Mobile and Sprint’s latest gambit.
Senator Amy Klobuchar of Minnesota, the top Democrat on the Senate’s antitrust subcommittee, raised concerns about the proposed merger. ‘‘Competition among the four largest cellphone carriers has led to lower prices, better service, and more innovation,’’ she said in a statement.
T-Mobile and Sprint contend that the market looks different than it did when they last tried to combine in 2014. The need to build out 5G requires tens of billions of dollars in investments that T-Mobile and Sprint, especially, would be hard-pressed to put up on their own. And there are fresh competitors in the sector. Comcast, for example, has quickly drawn hundreds of thousands of wireless service customers by bundling mobile phones with their cable plans, even if it loses the company money.
A huge part of T-Mobile and Sprint’s push is emphasizing the future of 5G. Proponents say the superfast wireless standard would not only make downloading movies faster, but underpin huge advances in autonomous vehicles, Internet-connected devices, and more.
The White House has declared 5G wireless a vital national priority.
Material from the Washington Post was used in this report.