Rumors are starting to spread about a merger between T-Mobile and Sprint in the near future. This is according to CNBC.
As of the moment, the major carriers in the United States are AT&T and Verizon. Sprint and T-Mobile are considered to be minor carriers.
Before this article moves forward, there are few important facts that you should know about:
-The smartphone market in the United States is already nearing a point of saturation. According to a report by Pew Research, 95% of Americans already own at least 1 cell phone. This means that new subscribers are becoming a rare commodity for carriers.
-Verizon has 147 million subscribers and AT&T has 137 million subscribers.
-Sprint has 53 million subscribers and T-Mobile has 70 million subscribers.
As you can see, Sprint and T-Mobile have a significantly smaller subscriber base. However, if the two companies come to a merge, the newly merged company would have 123 million subscribers. Even with 123 million subscribers, the new company would still sit behind the two major carriers. Nevertheless, this is still a huge improvement compared to the current state of T-Mobile and Sprint.
The possible merger of T-Mobile and Sprint is not really a new subject. In fact, Softbank, the parent company of Sprint, already tried to acquire T-Mobile way back in 2014. The merger never materialized, partly because of the intervention of Federal Communication Commission (FCC). The said commission has strict regulation when it comes to mergers and acquisitions to ensure that no company can achieve market monopoly or come close to a monopoly.
However, back in 2014, the industry climate was drastically different compared to now. Hence, FCC regulations should not be able to intervene if T-Mobile and Sprint decide to merge.
Another reason why the possible merge may happen is because of Trump's administration. With Donald Trump sitting on the presidential chair, the former FCC chairman Thomas Wheeler handed down the seat to Ajit Pai. With the new FCC chairman, the commission is less involved when it comes to regulating mergers and acquisitions. In fact, the commission has indicated that they may be rolling back a few of the more stringent rules and regulations that were implemented by the previous FCC.
In early 2017, Softbank reported that they were renewing their interest in a possible merger with T-Mobile. According to Softbank, they would be able to make an offer to T-Mobile in the near future.
On the other hand, there are critics that are extremely opposing the merger. According to some economists, the magic number is at least 4. This means that in any industry, there should be at least 4 major players. A similar scenario may be compared to Canada's telecom industry. As of the moment, there are only 3 major carriers in Canada, and it's the biggest reason why Canadian consumers are suffering high telecommunication costs.