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Sprint-T-Mobile merger questions: Will regulators OK it? And, Legere as CEO?

Matt Hamblen | June 6, 2014
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 would T-Mobile CEO John Legere run the combined company?

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 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."

 

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