What the Sprint and T-Mobile merger will mean for the 5G future of telecoms

30 Apr 2018

T-Mobile store in Pennsylvania. Image: Helen89/Shutterstock

The €120bn mega-merger between Sprint and T-Mobile could reshape the US wireless landscape.

I don’t know John Legere personally but I’ve always marvelled at his swagger. It feels fitting that the CEO of the combined telecoms giant comprising T-Mobile and Sprint – which will be known as T-Mobile – will be none other than Legere.

Go to any telecoms event anywhere in the world and the uniform of the industry is a sober business suit. Not for Legere. He wore the T-shirt, literally, resembling a defiant rock’n’roll man-baby who refused to let go of teenage rockstar dreams and could be seen everywhere in his pink T-mobile T-shirt, long dark tresses and leather jacket, uttering profanities about the competition.

Everything he did since taking the role of CEO of T-Mobile can be described as buccaneering, turning a struggling business into what is now one of the biggest mobile operators in North America, almost on par with rivals AT&T and Verizon.

Over the weekend, it emerged that T-Mobile and Sprint clinched a €120bn ($146bn) deal that will combine the third- and fourth-largest wireless carriers in the US.

Combined, the new company will have more than 127m wireless subscribers.

So, what impact will this have on the US wireless industry and what will it mean for the rest of the telecoms industry globally?

It changes the face of leadership in the telecoms business

As I said, the traditional telecoms world is one of boring business suits closely defended by regulatory lawyers and phalanxes of PRs.

There is a reason for this: smoke and mirrors. They watch each other closely as if it is the Cold War, astutely assessing advances in technology, weighing up multimillion-dollar bets and at the same time quibbling over marketing tactics just to squeeze that tiny little bit of average revenue per user from the consumer.

And along came Legere, described by Fast Company as a “profanity-spewing shock-jock of corporate America”, adding: “Is this the future of leadership?”

Legere is noted for his “un-carrier” approach to telecoms, with his creative style including abolishing contracts, handing out unlimited upgrades for iPhones and promising to pay off customers’ contracts if they switch.

The key battlefield will be 5G

Marketers at telecoms companies and tech firms across the world are a little premature in their promises for fifth-generation mobile (5G), a technology evolution that still doesn’t have an official standard.

But that’s how the telecoms business rolls: new tech equals new marketing and PR campaigns.

In the announcement, the combined T-Mobile promises a new company that will “create robust competition and lower prices across wireless, video and broadband” and lead the way to 5G.

“The new company will be able to light up a broad and deep 5G network faster than either company could separately. T-Mobile deployed nationwide LTE twice as fast as Verizon and three times faster than AT&T, and the combined company is positioned to do the same in 5G with deep spectrum assets and network capacity.”

This is still not a done deal

The merger of T-Mobile and Sprint has been in the works for a number of years and is almost a fait accompli for the respective controlling shareholders of the two companies as well as Deutsche Telekom and SoftBank, with talks going back to 2014.

However, the $146bn all-stock deal, which values Sprint at $59bn and consumes its considerable debt, still faces significant regulatory hurdles. Antitrust regulators may quake at the idea of reducing the number of major telecoms in the US from four down to three.

It is a huge gambit as telecoms investment is not cheap and, despite Legere’s swagger and talk, investing in 5G could consume billions of dollars.

Judging by Legere’s tactics, the newly combined operator will want to come out fighting and is likely to fire off an opening salvo by beginning a glitzy price war against rivals to win consumers.

A previous acquisition attempt for T-Mobile by AT&T in 2011 was dropped amid scrutiny by the Obama administration. Whether or not the Trump administration is going to be on side is anybody’s guess.

Reports from the US suggest that the FCC is likely to approve the merger but the Department of Justice is harder to predict.

Either way, things are about to become very interesting for US telecoms and, indeed, telecoms across the world as entire countries and economies figure out ways to reduce regulatory barriers to welcome the advent of 5G.

T-Mobile store in Pennsylvania. Image: Helen89/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years