Sprint-T-Mobile merger questions: Will regulators OK it? And, Legere as CEO?
Merger would create a larger No. 3 carrier, but number of nationwide carriers would fall from four to three
Computerworld - With reports out this week that Sprint and T-Mobile US are planning to announce a $32 billion merger this summer, two big questions linger: Would federal regulators approve the deal? And will T-Mobile CEO John Legere run the combined company?
Both the Federal Communications Commission and the U.S. Department of Justice would need to sign off on the agreement. In 2011, a mega deal by AT&T to buy T-Mobile was nixed by the FCC and DOJ officials, who concluded the deal was anticompetitive, and that keeping the four national carriers, Verizon Wireless, AT&T, Sprint and T-Mobile, instead of reducing that number to three, was in the public interest.
As for who would lead the combined company, unnamed parties to the talks have said T-Mobile's outspoken CEO John Legere, a polarizing figure know for his colorful, if crude, language at press conferences, would take the top job. Sprint CEO Dan Hesse has said in response that he wouldn't mind not taking the post, citing his age of 60 and his plans to do other things.
Sprint is about 80% owned by Japan's Softbank, and Softbank CEO and billionaire Masayoshi Son will figure prominently in any leadership decisions.
What follows are some insights, including comments from analysts, on what might happen in coming days and weeks, assuming the deal is formally announced.
How big would the merged company be?
A combined entity would add Sprint's 55.4 million wireless subscribers to T-Mobile's 46.7 million for a total of just over 102 million. Both AT&T and Verizon are nearly matched in wireless subscribers and now have 213 million wireless subscribers when combined.
While Verizon is a larger company in financial terms than AT&T with 35% of the nation's telecommunications market share, it now has 102.8 million wireless subscribers and 21 million landline accounts. That's just behind AT&T's 110.4 million wireless and 28 million landline customers. AT&T has about 32% market share overall, while the combined T-Mobile and Sprint would be about 30%, according to various sources.
In short, the proposed merger would create a much larger number three carrier in the U.S. than either T-Mobile or Sprint are separately.
Why would regulators approve this deal?
How can regulators possibly allow this deal after rejecting AT&T's purchase of T-Mobile in 2011?
The answer, primarily, is that the combined size of Sprint and T-Mobile would still make it the third-largest U.S. wireless carrier. An approval of the 2011 AT&T-T-Mobile deal would have reduced the number of top players, while also making AT&T a much bigger number one player.
Even so, that might not matter, depending on whom you ask.
The DOJ has filed opinions several times with the FCC in recent months indicating that it is "very adamant it would like at least four nationwide carriers in the market," said Roger Entner, an analyst at Recon Analytics, in an interview on Thursday. "So I think it's quite likely the DOJ will oppose it or at least put severe restrictions on it."
Mergers in general are also coming under consistent scrutiny by members of Congress, Entner said.
After rejecting the 2011 deal, DOJ officials said that T-Mobile's resurgence of late -- at least in terms of increased subscribers but not revenues -- is a "great validation of their blocking the AT&T and T-Mobile deal," Entner said.
Jack Gold, an analyst at J. Gold Associates sees it differently. "Regulators might have some reservations about losing out on a fourth major competitor in the market, but both T-Mobile and Sprint are very far behind the big guys in subscribers, so for them to be a competitive threat at all, the combination -- which would get them closer to the big two -- would likely be good for the market," Gold said.
Would the deal be good for consumers?
Would a large number three carrier made up of Sprint and T-Mobile offer customers better prices, more services or significantly greater advantages than if they remain separate?
Gold said yes. "With the combined spectrum of T-Mobile and Sprint, you'd see some interesting new services offered, and they'd likely be price-leading and competitive," he said. "Innovation would lead to better services for everyone."
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