Bad news for fans of competition — the long-rumored merger between T-Mobile and Sprint sounds like it’s going to become a reality. In a Bloomberg report published today, sources “familiar with the matter” have told the publication that a deal between the two telecom giants is on track to be announced by the end of October.
The report says that the two sides are working out how to value Sprint, which suggests that the merger would involve T-Mobile (specifically, majority owner Deutsche Telekom AG) acquiring the majority stake in Sprint currently held by SoftBank, a telecom giant based in Japan. It’s unclear whether the new company would adopt one or the other’s names, or if the joint company would operate under a new name. The deal would definitely fuse the two carriers into one, making the new company more competitive with AT&T and Verizon — T-Mobile and Sprint are currently the third and fourth largest telecoms in the United States.
Even if the rumors prove true, it’s not a lock that the merger will be approved by regulators. While mega-mergers have generally been allowed in recent years, the one glaring exception is the proposed merger of Comcast and Time Warner Cable that was spiked in 2015. This new merger could have similar problems — like the proposed Time Warner Cable-Comcast deal, this is a combination of two service providers in the same industry. The argument that the Time Warner Cable-Comcast deal was bad for competition should hold true for the same reasons for a potential T-Mobile-Sprint deal.
But, it’s hard to say. The Trump administration suggested that it would be hostile to the proposed AT&T-Time Warner merger (Time Warner is a media company distinct from Time Warner Cable), but it appears increasingly likely that the deal will go through as planned. If it does, the current government may not prove to be as hostile to large-scale mergers as some had feared at the height of the anti-AT&T-Time Warner merger rhetoric.
The Bloomberg report suggests that the two companies are at least planning for the possibility of the merger being blocked. The proposed deal is said to not include a breakup fee, meaning the two companies could break off merger talks with no cost to themselves. In this case, the breakup fee would have likely consisted of a hefty sum paid by the acquiring party (presumably Deutsche Telekom AG) to the party being acquired in the event of the deal falling through.
Should the deal get past regulators, the combined company could be particularly well positioned for the 5G era. T-Mobile is frequently being rated as one of the two fastest networks in many markets and has slowly been improving their poor performance in smaller markets and rural areas. There’s promise on the Sprint side, too — while competing in 4G LTE is all but a lost cause, we’ve noted before that the company owns a lot of spectrum primed to be very useful for 5G networks, setting them up to be far more competitive in the years to come. The combination of a widespread, stable 4G LTE network from T-Mobile and a fast, competitive 5G network from Sprint could set the combined company up for dominance a few years from now.