Sprint, T-Mobile Merger Rumors Are Nothing More Than a Trial Balloon

By Wayne Rash  |  Posted 2013-12-16 Print this article Print

He also bought the once-legendary and now-defunct Comdex computer industry trade show in 1995 and sold it in 2001 after a precipitous drop in attendance and exhibitor participation.

His cell phone operations in Japan have failed to grow beyond third place in the competitive market there, and his so far brief ownership of Sprint hasn't led to any significant growth. While Son is known for aggressively acquiring companies, his track record at actually running them isn't as stellar.

This leads to the question of why anyone might think this is a good idea, outside of the Softbank executive suite. Of course it's easy to see why Softbank might want T-Mobile. After all, the self-described un-carrier has grown faster than any of the other U.S. wireless companies. Its new contract-free pricing strategy is transforming the wireless industry. Under CEO John Legere's leadership, T-Mobile has turned the corner. Clearly Softbank can recognize success when it sees it.

But would the Department of Justice think it's a good idea? After all, T-Mobile is doing exactly what the Department of Justice wanted to see when it sued AT&T to stop the last merger attempt. It's performing in exactly the way the FCC wanted when it called the merger into question. How would reducing the competition in the United States benefit consumers? Clearly it wouldn't. In fact, a Softbank purchase would ensure that T-Mobile's challenge to business as usual would be shut down. It's likely the old, anti-consumer ways would return.

We would, in effect, see our wireless industry become like the three-way competition in Canada, where contracts are expensive and service is mediocre. Regulators in the United States have repeatedly held that four competitors are necessary to ensure a healthy industry, and that three won't do.

So the next question becomes, will Softbank try anyway? That's hard to say, but a look at Softbank's track record seems to indicate that the company believes it can do anything it wants with enough money.

If the matter were simply one of selling stock, then it could do just that. But there's more to it than that. Regulators must also believe that such an acquisition is in the public interest. It's hard to imagine a situation in which a Softbank acquisition of T-Mobile would be in the public interest.

On the other hand, it's quite clear that by diminishing competition, especially when the competitor being eliminated is the one that's the most transformative, would hurt consumers. Effectively, wireless service in the U.S. would go back to being expensive, unresponsive and uncompetitive.

U.S. consumers would suffer just so that Son could expand his telecommunications empire. But are Son's ambitions worth reducing competition in the U.S. wireless industry? I don't think so.



Submit a Comment

Loading Comments...
Manage your Newsletters: Login   Register My Newsletters

Rocket Fuel