Will T-Mobile, MetroPCS and Sprint Deals Change the Industry?
Verizon Wireless, AT&T, Sprint and T-Mobile—the nation's four largest wireless carriers, respectively—along with their millions of wireless subscribers, are likely to be affected, to varying degrees, by the news of the last few weeks.
Shifts in the size, and so power, of the carriers changes their ability to compete at a national level and ultimately the prices they offer subscribers, as we learned from AT&T's failed 2011 bid to purchase Deutsche Telekom (DT)-owned T-Mobile. U.S. federal regulators felt so strongly that that an overly large AT&T would create two dominating carriers (AT&T and Verizon) and ultimately higher prices for consumers that they not only disapproved of the deal, but sued to stop it.
This summer, Softbank, Japan's third-largest carrier, began talks about financially backing a combined T-Mobile and Sprint, which DT, having learned its lesson with AT&T, ultimately backed away from, fearing regulators would again object to a carrier of that size, according to an Oct. 11 report from CNBC.
What happened from there, the public is now learning, is that DT decided that a T-Mobile merger with U.S. No. 5 carrier, MetroPCS, would be far less objectionable—and rightly so; MetroPCS has about 9 million subscribers to T-Mobile's 33 million and Sprint's 56 million; AT&T and Verizon, in nearly a league of their own, have 105 million and 111 million subscribers, respectively—and Softbank then began focusing on Sprint and its partner Clearwire.
If both deals go through—if Softbank buys a majority share of Sprint, giving it the money it needs to roll out a robust Long Term Evolution (LTE) network, and T-Mobile and MetroPCS team up to create a firecracker of a value-focused player—in a year's time, might the wireless industry be a different animal?
Maybe, says Charles King, principal analyst with Pund-IT.
"While a deal with Softbank will provide Sprint very badly needed cash for spectrum investment, the broader wireless industry is in the midst of a more fundamental evolution," King told eWEEK. "Market leaders Verizon and AT&T are promoting services far afield from traditional mobile phones, offering themselves as alternatives to cable and other media distribution channels. You have to walk before you can run, of course, and in the case of the Softbank deal, Sprint is simply looking for a way to stay on its feet."
To thrive over the long term, King added, both T-Mobile and Sprint would need to develop services and offerings that go beyond conventional mobile phones.
Softbank would probably do much better to invest in emerging markets, said Ken Hyers, a senior analyst with Technology Business Research.
But as things stand, "if Softbank can round up enough cash for Sprint and a spectrum shopping spree, and has the stomach to take a few more years of turmoil as Sprint goes through with its Network Vision strategy," Hyers told eWEEK, "then it would end up with a solid carrier in a mature and highly competitive market.
Telecom companies need capital, and with Softbank ready to supply some, "Sprint has little choice but to sell equity to a better-heeled partner," said Roger Kay, principal analyst with EndPoint Technologies.
"That having been said," Kay added, "I don't think the market in the U.S. will have fundamentally changed a year from now. Verizon and AT&T will still dominate, but the two smaller firms, which risked having to make an exit, will still be around."
On whether we consumers can expect much change, Current Analysis analyst Avi Greengart replied, "The U.S. wireless industry is a dynamic, constantly changing market. There has been plenty of consolidation, but also new business models, pricing plans and devices in all shapes [and sizes]. Analyzing this market is challenging; I do not expect to be out of a job any time soon."