Sprint and T-Mobile have agreed to a $31.6 billion deal that, if it gets through federal regulators—which is far from a sure bet—would create a formidable carrier to really compete against AT&T and Verizon. The deal comes packaged with a $1 billion "breakup" fee that Sprint would have to pay T-Mobile in the event the deal does not go through. After the deal, Deutsche Telekom, which owns about 67% of T-Mobile, would maintain a 20% ownership stake.
While regulators denied AT&T's offer for Tmo in the past, this deal may garner more support as the nation's third and fourth largest carriers plan to combine, which is something that Softbank (company that owns Sprint) will argue will create more competition among the major players.
The combined networks of the two companies would put a scare into the "big two", as they'll no longer hold their status for the best networks in country. Without that distinction, they would truly have to compete pricing-wise with a Sprint/Tmo monster—one that, i strategies remain in place, could offer truly unlimited data (Sprint) without requiring two-year commitments from subscribers (T-Mobile).
As a long time Sprint customer, and an admirer of John Legere's T-Mobile, I am very much rooting for this to happen. Sprint Chairman and Softbank CEO Masayoshi Son has been outspoken in his desire to not only purchase T-Mobile, but to light a fire under the asses of AT&T and Verizon, even going so far as saying that he envisions a company that can provide faster LTE speeds than in-home Wi-Fi. Now, that's a big statement, but I like his ambition.
Of course, there are no shortage of hurdles for this deal to overcome. One is the regulators, sure, but if Time Warner can be purchased by Comcast, and DirecTV can be purchased by AT&T, I'm not sure that this deal is much different (although in a different communications bracket).
Second is how the merged company will operate. Does Legere take over (my vote), does Son run both companies? And no, I don't have much faith in Dan Hesse, Sprint's current CEO, having much to do with the new entity.
What networks will this new company operate on? Sure, getting these two together will take time, but one thing that time can not do is combine their networks. Sprint runs on a CDMA network (like Verizon), while AT&T runs on a GSM network (like AT&T, and the majority of the world). As both have made significant strides over past few years to upgrade their respective networks, does one take the fall in favor of the other? Sprint has plenty of unused spectrum and getting-better-every-day LTE, while T-Mobile is still in the early stages of their LTE rollout.
Lots of issues in play here, but I for one am excited at the prospect. What do you guys think? And seriously, what do you think of SprintMo? It's got a certain ring to it, right?
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