Will T-Mobile, Sprint actually merge this time?

T-Mobile and Sprint are back at the negotiating table trying to make a merger happen. They have tried several times over the last several years with no success. What is different this time and what are the chances of success?

t mobile ceo john legere
Reuters

T-Mobile USA and Sprint have been talking about merging several times over the last several years, but they never actually make it happen. Word is that they are at it once again. So, will they have any more luck this time pulling off a merger? If you were an odds-maker, what would you say the chances are of this merger happening?

Well, some things have changed, both in the wireless industry and with the two companies themselves. So, perhaps this time around they can come to terms. If they can, that’s great, but that’s only stage one. Stage two, they would still need to convince regulators to approve the merger. So, the T-Mobile, Sprint merger still has two big mountains to climb.

Typically, when a merger like this is announced, there is a fever pitch. Everyone thinks the two companies are on the same page and it’s only a question of getting government approval. In a few cases, mergers that didn’t happen the first time, are often eventually approved on the second try.

As an example, think back to the 1990’s when CEO Ed Whitacre of the baby bell SBC tried to acquire the long distance giant AT&T. Denied. Years later, around 2004 when the industry had changed, and long-distance company AT&T was then struggling for survival, Whitacre tried once again and this time he did it. Not only did he acquire AT&T, but he also acquired BellSouth and Cingular.

Today, that new company is the powerful and successful AT&T and AT&T Mobility. It’s amazing how certain mergers can transform both companies, industries and trajectories.

How wireless industry has changed since last merger attempt

So, just because a company tried and failed to merge in the past does not mean the deal won’t eventually happen. Things change over time. So, what has changed in the wireless industry since T-Mobile and Sprint last tried to merger?

The wireless industry continues to grow and transform. Yesterday, wireless was about the phone and the network. Ten years ago, Blackberry and Nokia led in the handset space and there were so many smaller networks. In fact, ten years before that Motorola was in the lead on the handset side.

Today, Motorola, Nokia and Blackberry are now at the bottom of the list and the iPhone and Android are tops of the smartphone list. Today, after much consolidation in the wireless network side, the leaders are Verizon Wireless, AT&T Mobility, T-Mobile and Sprint.

T-Mobile, Sprint merger attempt is not dead

A few months ago, T-Mobile and Sprint simply could not come to terms. So, the deal died. However, I said at the time that the deal was not dead. It was just taking a nap. Now the two wireless carriers have woken up and are thinking about getting together once again.

This time around the wireless industry has grown and changed and continues to do so. This time around there are new players like Google Project Fi, Comcast Xfinity Mobile and others like Charter Spectrum Mobile and Altice are lining up to enter the marketplace.

This time around T-Mobile is stronger and is preparing to enter the pay TV space later this year to keep their numbers growing. Maintaining growth is why I think they will be even more anxious to merge with Sprint.

This was not the case last time around. Last year T-Mobile didn’t think they needed any help staying on the growth path. But ever since, slowing growth is a new reason and now they are interested.

Sprint has not seen much action since the merger was called off and really needs to throw some gasoline on the fire to shake things up a bit. A merger could be just what the doctor ordered. Sprint is a good company with a good service at a good price. They just can’t seem to get their marketing mojo working.

So, this time around both T-Mobile and Sprint need this deal to happen. The same road blocks will be there this time around. So, since they are starting to talk once again, I think one side or the other or both, need to move toward the middle ground. Otherwise, why would they be talking once again.

My prediction on T-Mobile, Sprint merger

My prediction is if they can come together, is this. Since T-Mobile is on the growing side of the growth wave, and since Sprint is struggling, I believe John Legere will be CEO of the newly combined company.

I also think the new company name will be T-Mobile, simply because this is the company that is growing. Sprint tried a double name Sprint Nextel, which totally flopped a decade ago. But the Sprint name does have a long history. Nevertheless, the T-Mobile today is known for growth. That was not the case just a few short years ago.

With that said, who knows what will happen next. But when Masayoshi Son acquired Sprint a few years ago, he thought it would be a quick entry into a rapid growth business in the United States. Unfortunately, he was wrong. Now he is trying to figure his next, best step.

Why T-Mobile and Sprint need to merge

Does T-Mobile need to acquire Sprint? No. They are growing on their own. However, acquiring Sprint will take the pressure off to offer low cost services. That means T-Mobile prices could rise and profitability increase, and still stay below AT&T and Verizon. They would also be a much larger competitor on more equal grounds with their major competitors.

Does Sprint need to merge with T-Mobile? Need to? No. They don’t need to. However, without this deal, they simply will not grow any more than they are currently growing. And that growth rate is simply not enough. Example, they have not announced plans to move into pay TV like AT&T Mobility and T-Mobile.

Will regulators approve T-Mobile, Sprint merger?

Next, if T-Mobile and Sprint finally decide to get together, they still face one more mountain. The US Government. Will they allow the merger? That’s a big question. I think if this deal was happening last year, the answer would have been more likely no.

However, since it’s happening this year, and since the wireless industry is growing and changing with new competitors and new ideas, it may be approved. Will regulators look kindly at 3 major competitors in the space rather than the four we have today.

The benefit to having a separate T-Mobile and Sprint is they both compete with each other. That’s part of what keeps prices low. Would a merger disturb that low-cost model? If so, that could get in the way of approval. Much has changed in wireless, but much remains the same.

Now, we just have to sit back and wait and see what happens next.

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