Using the HHI [1], this would be classified as a highly concentrated industry, and the proposed merger increases the concentration quit a bit. I'd expect this to have a rough road with antitrust regulators.
I feel like antitrust should like the merger because it actually gives hope for a third real player in addition to Verizon and AT&T. Otherwise the market is effectively 2 players and some noise.
> Everybody is mad that airlines are temporarily making profits during the lag between fuel prices dropping from peaks and ticket prices catching up.
I knew nothing about this. My irritation towards the airline industry is entirely based on poor quality / service, which seems (to me) to be the result of my having no meaningful options as a consumer.
Nah it's because most of us are cheap as fuck and book flights by whichever is cheapest. So it's a race to the bottom for pricing which means cost minimisation ie. Shit support and service.
Try starting an airline with free checked baggage, free meal and more legroom. If your ticket price reflects the added cost you'd be bankrupt in a few months.
Sure. But merging legacy carriers, in my opinion, seems more likely to throttle the market's competitive features.
Would it be so terrible if the legacy airlines were thinned, and more Southwest/JetBlue/Virgin America-type newcomers showed up? As it is American, United, and Delta are the largest three airlines in the world because they all had fairly sizable mergers.
TMobile is a real 3rd player. AT&T and Verizon are just happy if their net adds in a year are positive vs TMobile which is adding a million+ every quarter for past 10 quarters.
I wonder how much of this is BECAUSE of T-Mobile? Finally the big carriers are offering not-horrible (but, at $10/day, not great either) international roaming, more unlimited plans than ever, etc. It's hard to tell what prices are doing because of the constant un-bundling of subsidies, and dropping BYOD discounts and so on, but overall, data quotas are going up, at least.
I agree that T-Mobile is having an outsized, positive effect on the market. I just was disappointed to find they weren't gaining on the big 2 as fast as I thought they were, and are instead continuing to lose ground.
This makes me wonder if those advantages of scale aren't greater than I thought, and maybe the merger would be beneficial.
But as a great admirer of what T-Mobile has done, and a since-voicestream customer, I'd hate to lose their scrappy underdog nature.
Really? T-Mobile and Sprint are _the_ real third and fourth. Everything after the first four is entirely categorically different: purely virtual operators that typically target low income and no contact customers. T-Mobile and Sprint are way closer to at&t and Verizon than to the virtual operators.
I had an earlier comment sketching a case where cellular carriers could mention cable industry competition as a merger reason, but there's some interesting tweets from someone at a DC org (Washington Center for Equitable Growth) referencing HHI as a fair reason for this to be blocked: https://twitter.com/Michael_Kades/status/990674900770844672
"First, merger is presumptively illegal under the 2010 Merger Guidelines. Based on data from Statista, HHIs will go from 2825 (already a highly concentrated market) to 3258. The 400+ increase more than double what triggers presumptive illegality."
There’s probably no breakup fee because it’s not a hostile takeover and they’re not “political enemies” of the Trump admin so the chances that it’s able to go through right now is the best it will likely ever be.
I think this is as much of a “throw shit at the wall and see what sticks” merger, but for the comapnies it makes perfect sense and it’s worth a shot.
I'll be happy if John Legere stays on as CEO. I was working at a T-Mobile technical support call center when he came on, and it was really amazing how quickly and effectively he turned the company around after becoming an independent company
Not happy for the merger, but kind of happy with Legere. I am a t-mobile customer and I noticed a definite shift in the quality of customer service from the late 00's to the mid 10's too, it's interesting you're basically giving me independent verification of that fact. I still am not happy with consolidation of the telecom industry as much as Legere is a good fellow.
The seamless phone call handoff is the tricky part. As I understand it, Google Fi does the equivalent of a remote screen session. The call is originated from a google server and the phone connects and reconnects to that server.
T-Mobile has been evaluating and deploying that technology since early 2006, I would be surprised if Google developed this technology themselves.
I was part of an early Beta for T-Mobile using Nokia flip phones that would work over a regular WiFi router. Part of the testing involved originating calls on WiFi and then transitioning to Cellular and vice versa.
I was on Nextel which I adored until they merged with Sprint and a dark pattern in their technical support flow tricked me into relinquishing a favorable data plan I had grandfathered in. I switched to T-mobile to get away from Sprint, so this news was somewhat concerning, but it sounds like they're keeping Legere on as CEO and hopefully retaining a fair amount of T-mobiles culture, so I'm willing to give it the benefit of the doubt.
Yeah it's Sprint the one being bought out and taken over by the looks of it. Sprint has been improving their network recently, so you'll wind up with nice technology and strong leadership. Hopefully it kind of goes through and doesn't get screwed up.
As a Sprint customer, I think this deal will be good for competition in the wireless market. Both Sprint and T-Mobile struggle to compete with AT&T and Verizon in coverage, so hopefully the merger will allow T-Mobile to invest in greater coverage and speed.
I switched from Sprint to T-mobile a while back. My impression of Sprint then was they were essentially milking their customers for whatever they could get while offering inferior service - requiring the renewal of their lousy contracts to continue at any one point and naturally having an inferior collection of phones you could only use with them, having goofy conditions for getting a replacement phone etc.
T-mobile's sell was offering no-contract service and having a network that you could buy broadly available GSM phones for (where with Sprint, you to switch carriers, you had to throw your phone away).
I really hope the merger will be more a mass transfer of Sprint customers to T-Mobile (and the existing T-mobile approach) but it could well involve the opposite; A big accumulation of customers could wind-up be squeezed for all they have as the combined effort is run into the ground.
(that is a strategy that yield cash for investors, it's not more "irrational" than spending a bunch for growth, indeed, "build monopoly with low margins, exploit monopoly with high margins, little service and little capital investment" is natural for many companies and industries.)
I mean, keep in mind the two carriers have incompatible networks, incompatible phones and so-forth so soon or later, there will have to be a "reconning" where one ex-carrier's phones become useless, yay!.
Fortunately T-Mobile isn't a position to milk customers here. They'll get destroyed by AT&T and Verizon rapidly if they attempt to go that direction (I think they know they'll still have to run uphill). T-Mobile + Sprint has no monopoly position at all that they can stand upon: both AT&T and Verizon have national coverage, vast resources, massive businesses with very large income streams.
I'd argue quite the opposite, for the next five years at least they'll have to work twice as hard after merging with Sprint, to make sure they don't implode. Sprint is carrying a giant debt bomb around its neck and has negative $24 billion in net tangible assets and $32 billion in long-term debt. Sprint has basically done nothing but lose money perpetually.
T-Mobile only recently got to a position of passable financial footing. Before that they bled red ink perpetually as well. It's a small miracle they weren't crushed by the duopoly. Their considerably negative balance sheet still shows the scars of that.
Combined the two will have $44 billion in long-term debt, with only T-Mobile's modest recent profit credibility to support it. They're likely to lose money, or close to it, initially as a combined entity until the Sprint side of the business is cleaned up.
Mistreating customers and abandoning what has worked so well for T-Mobile, would likely result in a financial disaster for the merged entity.
On the flip side, if they just do the obvious thing and keep doing what worked so well for T-Mobile - a few years out they've got a hundred billion in sales, a hundred billion dollar plus market cap, and $6 billion in annual net income, with the scale and resources to legitimately stand toe to toe with AT&T and Verizon.
> I mean, keep in mind the two carriers have incompatible networks, incompatible phones and so-forth so soon or later, there will have to be a "reconning" where one ex-carrier's phones become useless, yay!.
This actually is increasingly not true. This deal also allows for Sprint customers to roam onto TMobile starting today, so the networks and phones are not as incompatible as you believe.
I once switched to T-Mobile from the plan Sprint offered to families of employees.
At one point T-Mobile had better plans for the public than Sprint had as a private perk.
I sometimes wonder what would happen if a Bezos or Walton wandered into telecommunications, seeking the lowest possible margins, what mad havoc it would wreak.
Ultra low margins works in retail because it’s less capital intensive and risk is low. If Wal-Mart stopped innovating they’d still dominate for what, a decade or two? If a carrier decided to sit out a round of cellular evolution (let’s save $20 billion and skip 5G)? Even Verizon couldn’t do that. Or, if they bet on the wrong technology, like Sprint. In the 3G era they had about equal market share to Verizon and Cingular (which became AT&T), but bet on WiMAX for 4G and never recovered from that.
It's possible that the counterexamples are just outliers and you're still right.
Or maybe there's another factor, like you mention, how static is the industry and how much continual innovation or development is required.
Regardless, padded margins isn't necessarily an indicator of long term health. If you can safely charge your customers a significant premium, to pay for research or expansion for the health of the business in 10 years, there will be pressure from some shareholders and short term execs to raid the piggy bank. Keep prices high while lowering future investment.
The other odd thing about this as a hard law is MVNOs. Low cost competitors are renting space on existing networks. They're probably not paying lower than cost? I suppose they could be, but subsidized by the high paying customers of that network...
Hmm. I generally have a visceral feeling of being gouged any time I've paid any telecom provider, but maybe you're right and that's not entirely fair. I'll definitely have to give it some more thought.
Just to be clear, sprint supports selective BYOD. I recently migrated to sprint via the 1 year free deal at http://sprint.com/1yearfree - which supports a dozen or more phones.
> Both Sprint and T-Mobile struggle to compete with AT&T and Verizon in coverage
Indeed, and I've been considering switching from T-Mobile to Verizon for exactly that reason, much as I like T-Mobile.
I'm a long haul trucker, and there are long stretches of I-90, I-80 and I-70 where I have to roam, and therefore data is capped. It's not a disaster, but it makes it more difficult to stay firmly and broadly (pun intended) connected to the web, my employer and my family when I'm roaming.
I've taken to having my phone look for existing networks whenever I stop. Verizon is almost always available, and T-Mobile is often not. I don't pay attention to Sprint's availability; I left them long ago because they're Sprint.
I can see how you feel in your specific position, but the better solution would be for AT&T and Verizon to lose their unbalanced share in the market, not for further consolidation of the smaller providers.
T-Mobile does not appear to be struggling. Their coverage is supposed to match Verizon now. It was better than Verizon at my house the last I checked. Oddly, I live in one of the few places where Verizon’s coverage is terrible compared to the other 3 carriers. :/
If there was one CEO who worked really hard in the industry, it is John Legere. From one man marketing to creating a cult around him, he worked his ass off to get T-Mobile to where it is today. I wish more CEOs are like him- in the front lines, working hard and setting a great example for their employees.
It’ll be interesting to see how this works out. They’re combining a fast GSM network with an abysmal CDMA one. The customer experience is going to be rather inconsistent I would think.
They will most likely dump what remains of the CDMA network, absorb Sprint's spectrum (pending anti-trust/regulatory certification; luckily, in this environment, I don't think they'll be forced to divest spectrum to AT&T or Verizon), and offer 5G nationwide to compete against wired broadband providers (with the mobile comms market saturated, growth opportunities are needed to stoke growth).
It's a good deal now that Softbank gave up on keeping control of the combined org and is satisfied with a minority stake.
The modern Sprint network is nowhere near as awful as you think - Sprint falls down in the same place T-Mobile does - in coverage. Sprint does beat T-Mobile in densification in some markets.
Sprint and T-Mobile are now mostly LTE carriers with each of them having a certain (small) percentage of their spectrum allocated for either GSM or CDMA carriers.
This slide deck makes it clear that their plans are to rapidly refarm the CDMA only subs to VoLTE as soon as possible.
This is great news for OEMs - one less carrier to work on. Sprint was a pain to work with - their network requirements were the worst and they had horrible bloatware no one used that required to be extensively tested.
I don't know how this helps T-Mobile be more competitive. Sprint uses an incompatible network, has a horrible brand, and its customers hate their carrier. Seems to me like this would slow down a 5G network implementation.
Easy: T-Mobile will probably take Sprint's customers, transition them to GSM/LTE phones, and then throw away Sprint's network. I figure that takes about 2 years to make happen. Why should this have any effect on the new entity's investment on its (T-Mobile's) network?
It would have made much more sense for T-Mobile to merge with AT&T given the GSM heritage of both wireless networks. This is one situation where the sum of the whole is probably less than the parts. Bleh!
GSM and CDMA are almost dead. It’s all LTE now. V and S phones all have SIM cards now. Most carriers have run down their 2G fallback networks and taken that low band spectrum for LTE with VoLTE. Pre-LTE devices will suffer, but those guys would suffer in quality either way.
Mergers like these will enable the company to renegotiate all contracts, including lease agreements for larger assets like cellular infrastructure (towers). Given this, it's highly likely that all the MVNO businesses like MintSIM, BoostMobile, Virgin will also be reviewed.
Remember- MVNOs exist solely to sell excess capacity, and the contracted rate for service is often renewed ever 3-5 years. This merger provides an opportunity to accelerate that review.
Sure but network is not always LTE even with current phones. The thing I always hated about Verizon and Sprint is dropping to 1x. We have modern phones for Christ sake! On T-Mobile or ATT you will drop to HSDPA if no LTE is available which is more than acceptable. 1x is equivalent to “don’t bother”
Don't know why you were down-voted. Consolidation in the (relatively expensive) US mobile market is likely to hurt consumers, especially as T-Mobile has been the cheaper option for most people. And it's no secret that US anti-trust regulation is limp-wristed nowadays.
EDIT: I'm down-voted as well? Are my observations incorrect?
I think he's downvoted because his comment doesn't really contribute to an interesting discussion. It just raises a perennial political issue where commenters could have the same fight they've always had on this topic, without anything specific to this stage of the T-Mobile/Sprint merger. I would welcome specific detailed thoughts about anti-trust in this specific context, but rehashing the same arguments about anti-trust isn't that useful.
I didn't downvote you, but your observations are incorrect.
Sprint is going bankrupt, nothing is going to stop that as things are now for the independent entity. They're incapable of earning a profit, and are drowning in so much debt that it now is larger than their market cap - a classic inflection point that practically guarantees their business is going under. The public shareholders are being wiped out by the debt. That inevitable bankruptcy guarantees consolidation.
Sprint's annual debt interest expense:
2015: $2 billion
2016: $2.2 billion
2017: $2.5 billion
While they simultaneously bleed immense red ink year after year and their top line sales show zero growth for years. They're gradually being put down by the other three carriers. It was bad enough competing with AT&T and Verizon, now T-Mobile is kicking their ass too. This is happening in a market with near zero growth (ie heavily saturated), it's a near zero-sum outcome competition. For T-Mobile to keep growing like it has been, that growth has to come out of the pocket of competitors; Sprint loses, it's that simple.
In more realistic terms Sprint is already a failed business. Softbank is willing to sell into a minority position because they're very desperate, which should tell you everything you need to know about just how bad Sprint's situation is.
Consolidation is coming no matter what. The only actual choice is in how that looks. Here are the choices:
Merge with T-Mobile. Consolidation.
Sprint goes bankrupt and its pieces are sold off to competitors. AT&T, Verizon, T-Mobile emerge that much stronger. Consolidation.
Sprint is acquired by a very financially rich, massive company in the telecom space (ie Comcast, AT&T, Verizon). Few have shown an interest in buying them, where consolidation wouldn't be involved. There's a reason for that: they're a horrific money pit, which Masayoshi Son has discovered as everyone else before him did as well. Comcast is the sole hope outside of T-Mobile (AT&T and Verizon would not receive anti-trust approval to buy them), and that's a really terrible outcome. Comcast buying Sprint would be a consumer outcome far worse than consolidation with T-Mobile.
How much should cellular service cost that covers an area as wide as the U.S.? I currently pay $220 a month on T-mobile all taxes and fees included for unlimited data and voice on 5 phones and an iPad. 2G roaming in most of the world and faster roaming in Mexico. I also get 10GB of 4G tethering on one line and unlimited 512mbps tethering on all devices. We also get a family Netflix plan included.
Width isn’t really the right measurement. Yeah, a carrier has to blanket the US, but any given user only uses a small fraction of that, and they have users all over the country. Density seems like a better standard.
But it does make difference in rural areas. I have a family member that does social work in south ga. When I go down there, I don't get a signal outside of the city center with T-mobile. She travels a lot and she needs a good signal. Verizon has a good signal everywhere. T-mobile signal is also infamously bad within buildings. When I'm at work it's not a big deal - I just use WiFi calling but if I were frequently visiting clients' sites it would be a big deal.
People are willing to pay Verizon prices for that guaranteed coverage. There are also places in north ga with bad coverage by T-mobile. They just happen to go out of their way to have coverage in college towns, but once you veer to far away - nothing.
The trade off is worth it for me, but not to other people.
It doesn't sound like you travel very much. Or at least not to anywhere interesting.
The conventional wisdom is that Verizon has the best coverage, followed by AT&T, T-Mobile, and Sprint. But coverage is like politics -- everything is local. Or in this case, hyper-local.
For example, T-Mobile has outstanding coverage in the middle of the country thanks to its early acquisitions of PrimeCo and VoiceStream.
But I know a resort on the west coast where there is no Verizon, no AT&T, and no T-Mobile coverage. The only thing that connects is Sprint, because of an old Nextel tower in the middle of nowhere that was put in for the Forest Service back in push-to-talk days.
T-mobile and Sprint combined still won't have the power of AT&T and Verizon. Sprint has been struggling for years. I'm not sure how much longer it would last as an independent entity.
It will reduce overall competition, thus harming their own users. Instead of competing and building out their networks, they'll start raising prices. It's a very clear case that should be forbidden by anti-trust. But as I said, current anti-trust regulation is toothless and does almost nothing to prevent such market degradation.
They can only "build out networks" so much based on the available spectrum. Since they communicate in different spectrums, once they combine, the network coverage should improve.
FCC can revoke licenses from spectrum hoarders. They aren't supposed to sit on it without using. But spectrum shortage and current messed up system of spectrum selling is a problem in itself.
This deal should be blocked unless they're forced to divest spectrum to someone like Comcast or Charter. Comcast and Charter already have a partnership for wireless and are doing MVNOs, so they might be interested in it. Competition has been working well with 4 players in wireless, and prices have come down.
There is no world in which the government should be able to force a private company to give something hugely valuable to, of all possible options, Comcast (one of the worst companies in America).
Mergers are costly to society because they concentrate power. The government should _absolutely_ prevent mergers that concentrate power, or otherwise redistribute that power.
I'd rather them just block these things like they did up until the early 2000s ... but it's not unreasonable for them to break up the government granted monopoly on spectrums if they do allow mergers.
The EU did a lot of analysis about this between member states.
It concluded that markets with 4 or more providers were far better served (price, quality, coverage, etc) than those with 3 (which effectively is what the US will have now).
The UK blocked the merger of 3 and O2 on these grounds, as it would leave only 3 providers.
Does sprint even count as a provider? The size of the players must matter? If you have 4 players and 3 are there in name only, surely that can't still be true?
From the looks of it, Sprint will be bankrupt in a few years anyway, and then we'll still end up with 3 providers, but likely Verizon and AT&T (in addition to T-Mobile) will buy up parts of its carcass. I'd rather T-Mo gets it all, now, rather than have all three companies fight over the scraps, later.
Yeah, this merger (for whatever reason) reminds me a lot of the US Air/American Airlines merger of a few years ago. On the one hand, going from 4 to 3 'major' players seems an obvious loss for consumers. On the other hand, unless these two combine, I don't really see either of them able to really challenge AT&T/Verizon long term, which means that a merger to create three large players is better for consumers than a series of events that ultimately ends with two major players - and that seems like a fairly realistic outcome in this space.
Nice ideology. Reality is quite different. Companies in large mergers or with consolidated industries often have to make concessions to regulators to proceed with the merger.
Fwiw, I think the person you are replying to was concerned more about the fact that Comcast would benefit than that T-Mobile would be forced to make concessions.
Sprint has been losing money for years. If T-mobile didn't buy them, either someone else would buy the spectrum and they would go out of business. I was very much against the AT&T/Tmobile merger and history shows the government was right for blocking it.
But expecting competition from the cable companies is a bridge too far. The cable companies are the most anti customer friendly companies in the United States.
I haven't kept up with the industry (5G roadmap / company health), but yeah - it's worth remembering the AT&T/T-mobile of 2011 ( https://en.wikipedia.org/wiki/Attempted_purchase_of_T-Mobile... ) - back then it would've essentially made a monopoly out of GSM cellular usage. And back then cable competition didn't exist yet - xfinity wifi/mobile wasn't around then.
My assumption so far is that things are shifting such that LTE/5G are largely replacing CDMA, US govt would still prevent a GSM monopoly situation.
Cable companies are competing though - comcast started in 2014 'xfinity wifi' rollout via leased modem then got into mobile in 2017. If I'm reading https://www.xfinity.com/mobile/ correctly, it's cost-competitive ($45/mo unlimited compared to $70/mo on tmobile) - and works with the iphone myself and many US consumers already have.
I'm guessing verizon may already be doing something similar with fios modems.
> xfinity wifi/mobile wasn't around then. (snip) Cable companies are competing though
I don't see that happening. Xfinity Mobile is not a competitive product. It's just a Verizon MVNO. It can't seriously compete against Verizon, because it is Verizon.
[1] https://www.justice.gov/atr/herfindahl-hirschman-index