T-Mobile and Sprint merger may help them to stop wasting resources on stealing customers from each other and take on the industry goliaths AT&T and Verizon (Dan Frommer/Recode)

0
56

T-Mobile is trying to make a huge move: Yesterday, the No. 3 U.S. mobile operator announced an agreement to join with rival Sprint in a $26 billion all-stock merger. The big question is whether U.S. regulators will allow the transaction to take place, which would shrink the mobile market to three big, nationwide operators from four.

So it’s worth noting that the only reason T-Mobile is even able to try merging with Sprint is that the U.S. government effectively blocked its last big deal — when AT&T was going to acquire T-Mobile in 2011 for $39 billion — because of its threat to the market’s competitiveness.

And that actually turned out to be a great move for American consumers!

T-Mobile’s big-personality CEO John Legere — fueled by a breakup fee from AT&T, including wireless spectrum and $3 billion — dramatically shook up the U.S. mobile market with aggressive pricing and innovative new features, including free video streaming, generous all-access plans, big incentives to switch to T-Mobile, free international data roaming, free Netflix and MLB.TV subscriptions, free in-flight texting and more.

T-Mobile went from a boring also-ran to the most exciting company in telecom, seemingly overnight.

And it worked! T-Mobile finished 2017 with almost 73 million total customers, up from 33 million at the end of 2011. The company says it captured the majority of the U.S. mobile industry’s “postpaid phone growth” in 2017 — smartphone subscribers who aren’t on prepaid plans, a.k.a. the good part of the market — for the fourth consecutive year. It has boasted frequently of stealing customers from rival carriers.

So why would the U.S. government want to reduce competitiveness now by letting T-Mobile and Sprint merge? It’s not as if there are many up-and-coming challengers in the market — even Google’s attempts seem half-hearted. (Also, given the Department of Justice’s lawsuit against the AT&T-Time Warner merger, it’ll want to eye this deal with the same scrutiny.)

T-Mobile will make many arguments: That it’s not just competing with other mobile operators, but all sorts of internet providers; that it will speed up the launch of a new, higher-speed “5G” network, which is good for America; etc.

Perhaps.

But here’s one that might ring true: Despite all of T-Mobile’s innovation and growth, it’s still much smaller than AT&T and Verizon, which dominate.

Even merging with Sprint — which has never really recovered from its disaster merger with Nextel in 2005, even with SoftBank’s recent attention — would keep it in third place. Meanwhile, T-Mobile and Sprint have been wasting a lot of money stealing customers from each other.

Would that effort be better spent trying to take on the real industry Goliaths? Can the new T-Mobile offer even better service, with even more innovative features, at even better prices? Will John Legere keep pushing? Those are the $26 billion questions.


This post was originally published here