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Sprint and T-Mobile have finalized the details of a merger, which will entail Sprint buying T-Mobile for approximately $40 a share, or $32 billion, The New York Times reported June 4, citing people familiar with the matter.
None of the involved companies—including T-Mobile parent company Deutsche Telekom, which Reuters reported May 29 will keep a minority stake in the so-called “un-carrier,” as part of the deal—have confirmed or officially announced such a deal.
Masayoshi Son, chairman of Softbank, which owns a majority share of Sprint, has said a T-Mobile-Sprint merger is necessary to create the kind of scale required for the smaller carriers to seriously compete against Verizon Wireless and AT&T.
Son has called the current situation a “pseudo fight.” He told interviewer Charlie Rose in March that he wants “a real fight,” and given one, he’d come out swinging with massive price cuts.
Getting regulators—intent on protecting competition in the market— to agree to the deal won’t be easy; and, should it be approved, there will still be difficulties ahead.
“It’s going to be a messy deal,” Chris Antlitz, a senior analyst with Technology Business Research, told eWEEK.
“Assuming they do merge, there aren’t a lot of synergies that they’re going to get. They operate in very different spectrum bands, so there wouldn’t really be much to leverage there … they’d have to build new equipment … and get multi-mode chips in the phones. It’s a logistical nightmare,” said Antlitz. “Plus, the company cultures are very different. I think there could be a lot of clashes.”
That said, Antlitz added, something needs to happen.
“The market can’t support four operators right now, especially with the financial position that Sprint is in,” Antlitz explained. “Right now, the profits are going to AT&T and Verizon … there’s going to need to be some consolidation that takes place. I think there can be a strong case made to the politicians that ‘this is going to happen, you might as well let it happen now.'”
Multi-Screen Video Delivery
What Sprint and T-Mobile would be smart to do, said Antlitz, is stop focusing on scale and start aggressively pursuing the next major growth area: ubiquitous, multi-screen video delivery, or what TBR calls “video delivery evolution.”
“Something needs to happen with Dish,” said Antlitz, noting that Dish Chairman Charlie Ergen laid out the vision for ubiquitous video last spring, when Dish tried to merge with Sprint.
“You want to be in your home with video, broadband, data and voice, and you want to be outside your home with those same things,” Ergen said during an April 19, 2013 call to announce Dish’s $25.5 billion bid for Sprint. (Sprint instead followed through on the deal it was midway through with Softbank.)
“While the cable industry does a really good job in your home, and the current wireless industry does a really good job outside your home,” Ergen continued, “there’s really no one company on a national scale that puts it all together.”
Antlitz says that current Long Term Evolution (LTE) networks, which are optimized for data transmission and make possible what Code Division Multiple Access (CDMA) and Evolved High Speed Packet Access (HSPA+) couldn’t, have brought us to a place where Ergen’s vision—the next stage of wireless communications—can be a reality.
“I’m looking for Dish to do something big. They’re not just going to sit on their hands while AT&T sops up DirecTV,” he said, adding that if the AT&T deal, announced in May, doesn’t go through, there’s the possibility of Dish and DirecTV merging and going after an operator.
Ergen has said he can leverage his satellite assets to help the carriers get into video games and provide differentiated offerings,” said Antlitz. Sprint and T-Mobile “have to get in on this transformation that’s taking place, and they have to get it right.”