A Marriage In Telco Land?
Over the weekend rumors resurfaced that T-Mobile and Sprint might finalize a merger over the next few days. The tie up of the US’s #3 and #4 cellular provider would have a combined 100M customer base, putting it in second place right between Verizon’s 116M and AT&T’s 93M.
This is the third time TMo and Sprint have tried to merge. The most recent attempt was killed in late 2017 when Japan’s SoftBank Group, who owns 85% of Sprint, refused to give up operational control of the telco. Since then Sprint’s market cap has dropped by 25%, so SoftBank might be rethinking the decision. The first time the two were engaged was all the way back in 2014. In that instance the Obama Administration blocked the merger sighting anti-trust concerns. However since the two carriers are currently the third and fourth horses in the race the market shouldn’t be too disrupted by a merger.
It’s also worth noting the cellular marketplace in the US has matured over the last few years since just about everyone now has a smartphone through one of the four carriers. Since the overall market isn’t growing the way it used to we’ll continue to see downward price pressure and no-strings contracts. This will eat into the telcos’ profit margins, which sets up the perfect storm for consolidation at the lower end of the marketplace. Given this environment I’d expect the third time to be the charm for Sprint and T-Mobile.