T-Mobile To Acquire Sprint For $26 Billion
T-Mobile (NASDAQ: TMUS) has announced plans to acquire rival Sprint (NYSE: S) in a $26 billion all-stock deal. T-Mobile and Sprint are the two smallest of the four major wireless companies in the U.S. The deal would reduce the number of major wireless carriers to three. T-Mobile says the combined companies would have the resources to compete with Verizon and AT&T.
T-Mobile and Sprint vow that customers will be better off if they are allowed to merge. The combined company would have lower costs and greater economies of scale, allowing it to reduce prices for consumers. The statement also said the merged company would employ more people than the two companies do separately, creating thousands of new jobs.
One aim of the merged companies would be to develop a robust 5G network. T-Mobile said in its press release, “The new company will be able to light up a broad and deep 5G network faster than either company could separately.” John Legere, the T-Mobile chief executive officer who would lead the new company, said on Twitter, “Global tech leadership for the next decade is at stake.”
5G — the fifth generation of mobile networks – is expected to connect millions of devices, including robots, cars, and appliances, at speeds that are 10 to 100 times faster than current technology. U.S. wireless operators are expected to invest as much as $275 billion nationwide over seven years to build out 5G. Full 5G service isn’t expected to be commercially available until 2020.
Executives said the new T-Mobile will spend about $40 billion over 3 years on network integration, expansion, and new 5G construction. The projects will create thousands of new jobs, particularly in construction in rural communities.
The U.S. Federal Communications Commission will have to approve the deal. The Obama administration opposed a merger between the two wireless companies the last time it was proposed in 2014. In that case, the Justice Department argued that four national competitors are needed to ensure competition. Current FCC chairman Ajit Pai says he remains open about the number of major players in the American mobile market.
Antitrust authorities at the Justice Department will also be looking to determine whether the deal harms competition. Representative Frank Pallone, of New Jersey, the top Democrat on the Energy and Commerce Committee, and Representative Mike Doyle, of Pennsylvania, the top Democrat on the communications subcommittee have already called for a hearing on the deal. Legere and Sprint Chief Executive Officer Marcelo Claure are planning to go to Washington to talk about their plans to alleviate any concerns regulators may have.