Sprint to Take its Case for a T-Mobile Merger to the Chamber of Commerce
Despite intense opposition from the U.S. government, Sprint will be taking its case for a merger with T-Mobile directly to the Chamber of Commerce March 11, according to a new Wall Street Journal report Tuesday.
Sprint chairman and SoftBank Corp. president Masayoshi Son himself will be making the trip in hopes of convincing businesses and policy makers that acquiring T-Mobile will actually be good for the U.S. wireless market. U.S. antitrust officials as well as the FCC have expressed concern that more market consolidation will actually end up hurting consumers.
Masayoshi Son, however, doesn't think so. Verizon and AT&T, the two largest carriers in the United States, he says, are simply too big to allow third-place Sprint to compete properly.
"Without industry consolidation, for Sprint alone to become No. 1 in the U.S. is literally just a dream. I'm not content for Sprint to remain No. 3 because if we could grow bigger, we will offer aggressive discounts and services, just like we did in Japan," Son said during the recent Sprint quarterly earnings report.
"There is a huge gap between the bigger two and the smaller two, thus the level of competition isn't sound or strong."
Although T-Mobile has kept relatively mum on its stance concerning being acquired by Sprint, the fourth-largest carrier in the United States has expressed similar concerns.
"If the government wants us to have a competitive environment, you are going to make sure that the duopoly doesn't use their prowess to crush the little guys and have this sub-1 GHz spectrum be moved all to them," T-Mobile CEO and president John Legere said during a January interview on Bloomberg West.
"We're all going to need better scale and capability. The question starts to be: How do you take the maverick and supercharge it? We either need more spectrum and capability, a lot more investment, or we need consolidation."
Both Sprint and T-Mobile have essentially described the current U.S. marketplace as a duopoly with Verizon and AT&T sitting on top. Even if Sprint acquired T-Mobile, the combined subscriber base of the two carriers would still be smaller than AT&T.
Both T-Mobile and Verizon traveled to Washington in February for a Senate Judiciary Committee's Antitrust Subcommittee hearing on competitiveness in the wireless market. T-Mobile asserted that the current marketplace is making it hard to compete, while Verizon touted the U.S. wireless market as the best in the world based on the amount of dollars being poured in. In 2013 alone, $34 billion was spent on investments concerning the wireless market, including upgrading infrastructures to newer, faster LTE speeds.
There is some backtracking on Sprint's part, however.
"Removing T-Mobile from the market would substantially reduce the likelihood of market disruption by a maverick. T-Mobile, as one of only four national carries, provides a critical constraint on AT&T's consumer retail prices," Sprint said in a 2011 statement.
T-Mobile has recently shaken up the wireless market by doing away with contracts, allowing customers to upgrade more often, and aggressively (and sometimes childishly) berating competitor AT&T. U.S. government officials described T-Mobile as a "self-described 'challenger brand,' that historically has been a value provider," in the 2011 case.
Banks have given Sprint positive signs that proper financing could be obtained for the deal, but of course, it will have to be approved by the U.S. government first.
Let us know what you think of the United States having only three major carriers rather than four in the comments section below.