Already frustrated with the lack of options when it comes to picking a cell phone provider? T-Mobile and Sprint have reached an agreement to merge, the companies announced on Yesterday. If successful, that would shrink the number of major wireless carriers in the United States to three. Shareholders and regulators would still have to approve the $26 billion deal, which the companies have tried twice before.
In a joint statement, the wireless carriers said the combined company will have lower costs and better quality that could essentially help them compete with AT&T and Verizon. The proposed all-stock deal values Sprint at about $59 billion and while T. Mobile is valued at $146 billion.
The combined company will be based in Bellevue Washington and will be called T-Mobile. Current T-Mobile CEO John Legere will run the combined company, while T-Mobile COO Mike Sievert will become the new company’s COO and President. T-Mobile’s majority owner Deutsche Telekom will hold a 42 percent stake in the company, while Sprint majority owner SoftBank will hold 27 percent, with public stakeholders holding the rest. Sprint CEO Marcelo Claure and SoftBank CEO Masayoshi Son will sit on the combined company’s board.
The companies say that by combining, they’ll be able to lower prices and take advantage of “greater economies of scale”. The two companies have trailed their larger rivals, AT&T and Verizon, and the merger between Sprint and T-Mobile will help give them a boost as they begin to deploy their next-generation 5G network across the country. The combined company will have nearly 100 million customers.
Sprint has a lot of debt and has posted a string of annual losses. The company has cut costs and made itself more attractive to customers, BTIG Research analyst Walter Piecyk says, but it hasn’t invested enough in its network and doesn’t have enough airwave rights for quality service in rural areas.
T-Mobile, meanwhile, has been on a yearlong streak of adding customers. After the government nixed AT&T’s attempt to buy the company in 2011, T-Mobile led the way in many consumer-friendly changes, such as ditching two-year contracts and bringing back unlimited data plans. Consumers are paying less for cell phone service, thanks to T-Mobile’s influence on the industry and the resultant price wars.
“T-Mobile does not need a merger with Sprint to succeed, but Sprint might need one to survive,” Piecyk wrote in a research note.
The Communications Workers of America, a union for telecommunication workers, says the merger will cost at least 20,000 U.S. jobs and reduce competition in wireless, bringing higher prices.
