Proposed T-Mobile and Sprint Merger

It looks like Uncle Sam may be calling off the wedding……at least the merger of T-Mobile and Sprint.

 

Why are the Feds objecting to the merger?

 

The planned merger of T-Mobile and Sprint would drastically change the mobile cell market in the United States.  Reducing the players from 4 to 3 large companies is causing serious concern about the lack of competition.

 

The companies argue that the merger will result in more efficiencies allowing the combined company to reduce costs.  Whether these reductions would come down to the subscribers’ bill’s bottom line remains to be seen.

 

In a meeting earlier this month Justice Department staff presented their concerns with the deal and the companies’ arguments for the merger.

 

Are they correct being concerned with the merger?

 

A merger like this can result in a number of different outcomes.  In addition to the concern about competition, multiple companies existing in a given area in such as technology tend to lead to more innovation.  If we look at the U.S. telephone system prior to the AT&T breakup in 1984 we can see an example of this. There was the phone store where you bought or leased your telephone equipment.  Your selection was limited to a few colors and designs. The technology between these devices was similar and no motivation to change. No drive to be innovative. That’s what competition does for technology companies.

 

An example is the telephone answering machine.  Originally invented in 1960 it wasn’t affordable until after the AT&T breakup.  Shortly after 1984, sales increased to over 1 million units a year. This was due partially to the need to innovate to have new products for consumers to buy.

 

There are also advantages to a merger like this one.  One area is wireless bandwidth. Each mobile company is allocated a certain amount of bandwidth to run their services.  Increasing this by combining the allocation from both companies could create an area where they could be more competitive with other big players like Verizon and AT&T.

 

If the merger eventually goes through, will consumers be better off?

 

In my opinion, competition is good to keep costs down and innovation alive.  I feel we could benefit from more providers and see our options decreasing if there were less.  

 

I also see that this may create an opportunity for a new player to enter the national market.  Both Comcast and Charter offer wireless services along with Google through Google Fi.

A merger of this type has also been tried in the past.  In 2011 AT&T tried to buy T-Mobile. This deal was blocked by the Obama administration with many of the same concerns as today.

 

What are the players saying about the merger?

 

According to the Wall Street Journal both T-Mobile and the Justice Department declined to comment on the merger.   In a tweet Sprint stated, “We continue to have discussions with regulators about our proposed merger with @TMobile. That process is ongoing and we have no further comment.”

 

Apparently, Sprint is in a very difficult situation according to a company FCC filing.  It stated that it’s current performance is unsustainable. This might indicate that without the merger, a loss of a communication company will happen regardless.   Looks like the US Justice Department has some serious decisions to make.

 

William (Bill) Sikkens has been a technology expert for KXL on the Morning Show with Steve and Rebecca since 2014. With an expertise in I.T., cyber security and software design he has had more than 20 years’ experience with advanced technology. Sikkens conceptualizes and designs custom applications for many professional industries from health care to banking and has the ability to explain the details in a way all can understand.  Article edited by Gretchen Winkler.

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