What's going on?
On Sunday, American mobile telecom giant T-Mobile US ended years of speculation as it announced its intention to acquire competitor Sprint. The deal values Sprint at more than $26 billion!
What does this mean?
T-Mobile and Sprint are the third- and fourth-largest mobile service providers in the US – and despite giving chase in recent years, they haven’t managed to gain much ground on market leaders Verizon and AT&T. While T-Mobile’s been able to grow its customers some, Sprint has lost customers over the same period. The new combined company would have almost as many subscribers as its competitors – which, so the thinking goes, should enable it to compete more effectively in the future.
That is, if the deal actually happens. Sunday marks the third attempt to reach an agreement – the last effort collapsed in October because shareholders couldn’t reach an agreement on who would control the merged company.
Why should I care?
The bigger picture: 5G technology is expensive but inevitable.
T-Mobile has said it plans to spend $40 billion over the next three years investing in the next wave of 5G mobile technology with the aim of securing a leading market position. This’ll be paid for in part by the more than $40 billion of cost synergies (a.k.a. savings) the companies expect to generate thanks to the more efficient setup of a single, large network (versus two smaller ones).
For you personally: The US government is on line one.
As with the Asda/Sainsbury’s merger, this deal will be reviewed by the authorities – namely the US government. Their major concern will be ensuring that, with only three major players, rather than four, there’ll still be enough competition in the cellular market to stop companies charging consumers unfairly high prices. The Department of Justice and the Federal Communications Commission have blocked similar deals in the past where they determined that this would be the result.