Mergers and the Future of Mobile Connectivity Featured

11 months ago
(1 Vote)
Mergers and the Future of Mobile Connectivity Image Credit: 88studio/

The more mobile technology changes, the more some things stay the same. Since 2014, T-Mobile and Sprint have considered a combined effort and any carrier competition effects that may result.

Unlike past attempts, however, today’s merger talks - a.k.a. ‘Project Lakes’ - are more likely than ever to end with a different result. After failing to reach an agreement just months ago, both organizations appear to have a renewed interest in making this merger work after agreeing to a $26 billion dollar deal last month.

In addition to leadership changes and a clarification of shareholder benefits, the inability to compete for 5G spectrum seems to motivate these renewed merger talks most. While AT&T and Verizon have already made bids to acquire their own unique millimeter wave frequencies in the US, neither T-Mobile nor Sprint can currently afford to do the same - a major concern for these smaller providers.

Moving forward, both T-Mobile and Sprint worry that an inability to compete for 5G network bandwidth will leave each carrier uncompetitive and outdated. As 5G devices grow increasingly important to tomorrow’s advanced tech initiatives, a merged T-Mobile and Sprint entity will be able to pool financial resources and stake their own 5G spectrum claim before it’s too late.

Are two carriers better than one?

Because both carriers are long-time competitors with separate facilities and systems, don’t expect this merger to move quickly - even if it’s approved tomorrow. Combining two entities of this size is an extremely complex and drawn-out process; one that will most likely require years of incremental progress to complete.

Before these carriers can unlock the potential of a nationwide 5G network, T-Mobile and Sprint must survive a very lengthy and difficult integration. Since these next-gen wireless networks will be built upon existing 4G infrastructure, both providers (and their separate cellular data capabilities) need time to make the most of any shared mobile technologies - not to mention navigate technical and political boundaries, too.

For now, groups like the Federal Communications Commission (FCC) and the Department of Justice will meet to assess the validity of this potential merger. Through this review, the US government will decide whether a move to three major wireless carriers is something that works in the public’s best interest or not - as well as whether other industry competitors will be significantly harmed by this outcome.

So, will this sharp decline in competition benefit consumers and enterprise mobility efforts in the long run? T-Mobile and Sprint certainly seem to believe that’s the case. In their opinion, mobile consumers will benefit greatly from having three strong carrier choices instead of two strong ones and two weaker alternatives.

Economists, on the other hand, point to something called the Herfindahl-Hirschmann index (HHI) to dispute these carriers’ claims. The HHI, which quantitatively analyzes a market’s concentration, has historically been used as a tool to predict the competitive impact a potential merger has on its industry and whether it’s capable of creating a monopoly.

While markets can be scored anywhere from one to 10,000 on the HHI scale, any industry above 1,800 is considered highly concentrated and seriously lacking competition - i.e. not likely to prosper after a new merger occurs. When the US wireless carrier market was analyzed last year, the results returned a score of almost 3,000.

What does this number mean? Well, like any other sector, reducing the level of competition within the wireless carrier industry “makes it extremely likely prices will be higher". Additionally, experts worry that provider service quality and innovation will decline if history is any indication of future market performance once competition is removed.

Others, however, argue T-Mobile and Sprint survive in a unique environment that’s an exception to these economic rules. Despite years of limited competition between the four major US wireless providers, consumer prices have remained relatively static. Whether that flat pricing is the result of T-Mobile’s and Sprint’s innovative decisions to eliminate things like contracts, international roaming fees, and monthly data caps remains to be seen - especially if these organizations do eventually merge.

What does this merger mean for business?

Should T-Mobile and Sprint overcome the odds, the combined entity promises immediate benefits to mobile connectivity and network coverage for its 126 million customers. In fact, these combined carriers already plan to invest at least $40 billion in a nationwide 5G network - in addition to employing at least 200,000 Americans and lowering wireless customer costs.

While some companies may be slow to trust these claims after being burned by inferior network coverage in the past, there’s little argument that within the last 12 months T-Mobile and Sprint have worked hard to make significant progress in closing the competitive wireless carrier gap. Even with expanded mobile network capabilities, however, don’t expect this merged organization to compete with Verizon and AT&T on coverage anytime soon.

The value for businesses is added price flexibility and new monthly service plan options. For example, T-Mobile’s international plans are the envy of many other US carriers, so Sprint’s existing enterprise customers would benefit from enrolling frequent international travelers in a new plan that offers enhanced, lower-priced international features and capabilities.

However, this move could also have some negative consequences. Many mobile technology experts believe an industry with only three major players would be the end of unlimited data plans forever. If anyone needs evidence, look no further than our neighbours to the north. Canada, who has three major wireless carriers already, no longer offers customers an unlimited monthly data option. If one US carrier pulls their unlimited offering, expect the others to follow suit sooner rather than later.

For Sprint and smaller Mobile Virtual Network Operator (MVNO) customers that don’t own a Global System for Mobile communications (GSM)-enabled device, a merger could also create an immediate need to upgrade employee technology. Because Sprint and these smaller-scale wireless service providers still operate Code-Division Multiple Access (CDMA) networks for legacy endpoints and systems, a large portion of this new entity’s active user base will need to retire devices that will no longer be network compatible.

It will be interesting to see what the future holds for T-Mobile, Sprint, and mobile connectivity in general. As the enterprise mobility environment continues to evolve and grow in complexity, expert mobile technology partners will become essential for businesses to successfully navigate the wireless carrier industry’s increasingly advanced offerings.

Chris Koeneman is Senior Vice President at MOBI. He has extensive experience in developing go-to-market strategies for technology organisations, and has held leadership positions with AT&T, Intel and Cisco, among others, as well as innovative startups. Chris has led global teams focused on networking infrastructure, cloud services, and virtualisation solutions sold through OEMs, channel partners and direct, and has been part of two successful wireless acquisitions.


The Rise of the Robots: Why AI is Good for Telcos


The Fight Over Content Value Chains and Emergence of Value Based Pricing