The Strategy Analytics’ Service Provider Group new report, “US Wireless Outlook: T-Mobile/Sprint Merger Accelerates 5G with 17% Uplift” predicts that 5G adoption will speed up in the US with an approved merger of the number three and four wireless operators.
Along with Dish Network and the cable companies getting into wireless—Comcast gained over half a million subscribers on its MVNO Xfinity Mobile in the first year, and Charter Communications and Altice USA are working on wireless launches—the competitive wireless landscape in the US is heating up as 5G deployments are on the horizon.
Susan Welsh de Grimaldo, Director at Strategy Analytics, explains, “Will the Un-carrier become a carrier? We doubt it. The new T-Mobile even as a strong number two player more on par with Verizon and AT&T will remain disruptive and go after growth with its market-leading 5G smartphone positioning using low and mid-band spectrum. With the merger, the new company would be better positioned for a convergence play, growth in automotive and other high mobility/broad coverage 5G use cases, with new strength in wholesale and enterprise and positioning for Network-as-a-Service (NaaS) with 5G network slicing.”
Phil Kendall, Executive Director at Strategy Analytics, adds “The faster 5G deployment and adoption will be the main merger benefit for US consumers, though everything comes at a cost. Operators in three-player markets enjoy EBITDA margins 3-4 percentage points higher than those in four-player markets so a merger on this scale may weaken price competition and increase operator profits.”
Ken Hyers, Director, Emerging Device Technologies comments, “We expect early 5G smartphones in 2019 and 2020 to be very expensive, approaching US$1000, due to their high technical complexity and normal early mover premiums. T-Mobile and Sprint may need to subsidize the first wave of 5G smartphones if they want to bring down retail prices to realistic levels that early mass-adopters are willing to pay.”
Key findings of the report include:
- The T-Mobile/Sprint merger will drive 17% uplift of 5G subscribers, with marginal improvement in revenue outlook;
- While a combined T-Mobile/Sprint would have a stronger national play and spectrum advantage, both Verizon and AT&T are more than capable of responding and managing market share losses;
- The upside of faster 5G driven by the merger could be offset to some extent by a less competitive pricing landscape and potential for operators taking more profit out of market;
- By 2023, Strategy Analytics forecasts that the merged T-Mobile/Sprint operations will have outperformed the individual operations by almost 1 percentage point market share of gross additions, 0.5 p.p. subscription market share, and 0.4 p.p. revenue market share.
Strategy Analytics anticipates that the subscription market share gains of T-Mobile/Sprint will be felt relatively evenly between Verizon and AT&T. However, Verizon's greater reliance on the postpaid market for its revenue, the market where the accelerated 5G development will be mainly felt in this forecast timeframe, will result in it being marginally more impacted by the merger in revenue terms.