Saturday, 25 May 2019

T-Mobile and Sprint plot last ditch asset sale to save $26bn merger

By Chris Kelly, Total Telecom
Friday 17 May 19

A range of options are on the table, as the two companies seek to secure regulatory approval for their long awaited merger

US carriers T-Mobile and Sprint are considering selling off their respective prepaid business units in a last-ditch attempt to gain regulatory approval for their proposed $26.5 billion merger. T-Mobile and Sprint are currently the third and fourth largest telcos in the US, but their proposed merger would create a new entity capable of challenging the US’ big two players of AT&…

US carriers T-Mobile and Sprint are considering selling off their respective prepaid business units in a last-ditch attempt to gain regulatory approval for their proposed $26.5 billion merger.

T-Mobile and Sprint are currently the third and fourth largest telcos in the US, but their proposed merger would create a new entity capable of challenging the US’ big two players of AT&T and Verizon. Proponents of the deal say that the newly merged company would have the required scale to drive innovation and speed up nationwide rollout of 5G network services in the US.

However, regulators appear concerned that the merger could reduce competition in the wireless telecoms industry, particularly in the prepaid, or pay-as-you-go, market.

The pair serve the pre-paid market through their pay-as-you go subsidiaries, namely Metro (T-Mobile) and Virgin Mobile and Boost (both Sprint). Together, the subsidiaries have a market share of around 42 per cent.

T-Mobile’s famously outspoken CEO, John Legere, has been uncharacteristically tight lipped on social media regarding the proposed merger, saying that he would not comment publicly “out of respect for the [legal] process”.

 

 

Sources familiar with the matter told the Bloomberg news agency that separating and selling off their respective prepaid business units was just one of the options being considered by the carriers. Other options include setting up a new fourth carrier through a network leasing arrangement and selling off some of their existing airwave licences. However, neither of these options are believed to be the carriers’ preferred option. 

Critics of the merger have also stated that it would negatively impact on the US job market, while simultaneously lining the pockets of the carriers foreign-owned parent companies. One estimate claimed that the merger would cost around 30,000 jobs, mainly in the retail sector.

The president of the US telecoms industry’s biggest union, the Communications Workers of America, recently told the press that “trusting Sprint and T-Mobile with American jobs [would be] like trusting a vampire at a blood bank”.

In order to proceed with the merger, T-Mobile and Sprint will have to win regulatory approval from both the US Justice Department’s antitrust division and the Federal Communications Commission. Both entities are due to rule on the proposed merger in the coming months. 

Also in the news:

T-Mobile downplays usefulness of mmWave spectrum 

US court casts doubt over T-Mobile and Sprint merger

T-Mobile launches pay-TV services in the US

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