Sprint and T-Mobile are currently awaiting on regulatory approval of their proposed merger. This merger — which has been widely reported on since speculation of a $20+ Billion bid by Sprint and new Sprint owner SoftBank began in December — is a tough sell, and most industry analysts agree that it won’t be approved. However, there are many reasons why it should be approved, and many proponents are pushing for the merger.
To understand some of the issue, we have to go back… way back. At the dawn of the telecommunications revolution, AT&T (which was still widely known by it’s original full name, American Telephone & Telegraph, a name that was dropped several years ago) was the most well known of several telecom providers. As the decades marched on, AT&T began merging with other companies, either by outright buying them and folding them into AT&T, or by buying a significant stake in them so as to have the benefits of owning those companies without actually owning them. By the 1980s, AT&T had become a full monopoly of the telecom industry; an anti-trust suit was brought against them, and regulators forced AT&T to spin off most of their holdings, resulting in literally hundreds of new, small, regional telecom providers.
Fast forward to the late 1990s: wireless telecoms are now the new thing, and the industry is booming. Still feeling the effects of the anti-trust suit in the ’80s, all these wireless telecoms are more or less these regional carriers that were spun off by AT&T, with only a few national carriers (namely Sprint and AT&T, who has built back up to a national name after being decimated about 15 years earlier). This was no issue, there were so many medium sized regional carriers that there was enough competition in the market.
Regional carriers began to grow, and by the mid 2000s, those regional carriers had become national. There was plenty of national competition, namely AT&T Wireless, Cingular Wireless, Sprint PCS, Verizon Wireless, Alltel, T-Mobile, and Nextel. The competition between national carriers was high, and regional carriers weren’t left in the cold as they were still large enough to compete with the ‘big boys’… the market was healthy.
Then… it was the ’30s through the ’70s AT&T all over again: Cingular Wireless bought out AT&T Wireless (and then eventually AT&T Wireless parent AT&T acquired Cingular, rebranding it as AT&T Mobility), Sprint and Nextel announced a ‘merger of equals’, and Verizon Wireless bought out Alltel (in most regions of the US), and every single one of these national carriers gobbled up smaller regional carriers. All of this happened in a span of about 4 years, leaving only the ‘big four’ (in order of size, largest to smallest): AT&T Mobility, Verizon Wireless, Sprint Nextel Corp (known simply as Sprint), and T-Mobile USA, with the small regional carriers having almost no impact on the market. AT&T and Verizon combined hold about 40% of the entire US wireless market, including regional carriers, and about 50-60% of the nationwide market.
AT&T and Verizon now have a virtual duopoly over the wireless market, forcing customers into binding contracts that extensively overcharge, some would say extorting their customers because in all reality, where are those customers going to go to get similar service?
A Sprint/T-Mobile merger would combine the wireless spectrum of the two, which is valuable in the current ‘spectrum crunch’ that the US is facing, therefore allowing the newly merged Sprint, which would now be a very close third, to further build out their network, which is currently dwarfed by the size of AT&T and Verizon’s networks. Most importantly to customers, Sprint and T-Mobile are currently pushing against the grain on plans and pricing: Sprint is the only carrier to offer truly unlimited data, which they offer at a cheaper rate than the other’s capped data, and T-Mobile’s Uncarrier initiative works to break the mold of national carriers, doing away with binding contracts, and offering cheaper options that compare to regional prices.
All in all, a merged Sprint/T-Mobile would bring competition to the market and more choices for customers.