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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?

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."

Legere at T-Mobile has led a charge toward no contracts and other "un-carrier" moves that have forced Verizon and AT&T to respond. A more recent move by T-Mobile to reimburse new customers up to $600 to pay off their early termination fee (ETF) with another carrier gave T-Mobile an increase iof 2 million subscribers in the first quarter of 2014, even though it has cost the company in revenues.

Gold said if T-Mobile and Sprint combine, they would need to build more cell towers to improve their nationwide coverage to carry data and voice over their combined spectrum holdings. "T-Mobile has inferior coverage, making it sometimes hard to even get a connection, which is why they support Wi-Fi calling," said Gold, a T-Mobile customer.

In terms of new services that both consumers and business customers would want from a combined T-Mobile-Sprint, Gold suggested some of the same premium offers that AT&T and Verizon have announced, including services for machine-to-machine wireless communications, health, security, home and business automation, cars and specialty entertainment.

"They have to go upstream and provide premium services that people or businesses will pay good money for," he said. "That's their challenge."

Entner said a combined entity would create economies of scale to naturally result in better networks at lower costs.

"If you look at the track record of this industry, it's a fallacy that the big companies aren't as innovative as the small ones," Entner said. "There are economic pressures, and the people and companies who want to lead the market should be allowed to lead the market."

 

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