Here’s why a T-Mobile and Sprint merger may not be possible

T-MobileNetworkImage7:00 AM — For a while now, we have been hearing about a possible purchase of T-Mobile by Sprint.  SoftBank, a Japanese telecommunications and Internet corporation made the purchase of Sprint last year with a $21.6 billion investment.  Since then, SoftBank has been pushing Sprint to issue a wide range of improvements, especially on its network.  Currently, Sprint has the slowest and degrading network out of the big four.  The company’s LTE is almost non-existent and their 3G network is very slow.  While SoftBank is trying to improve Sprint, they are also looking at making another purchase.  Sprint-SoftBank are already working with several banks in order to come up with proper funding to bid for T-Mobile.

It’s worth noting that as of late, CEO John Legere and T-Mobile have caused a great earthquake in the United States wireless industry.  With its Uncarrier initiative, the carrier is now giving more benefits and options for consumers.  With this type of initiative, other carriers such as AT&T are constantly losing customers.  AT&T tried to shoot back at T-Mobile with its $450 credit program where they would pay customers $200 credit with up to $250 credit for a phone trade-in, however this was seen as a bad attempt.  T-Mobile shot their “Uncarrier 4” by giving families $350 per line credit when they leave their current contracts and pay the early termination fees (ETF).  Not to mention CEO John Legere has also started the “break-up” letter, that’s another very interesting initiative.

Even though Sprint may be working on a bid to takeover T-Mobile, there is a high chance that it will not go through.  First thing to keep in mind is that T-Mobile’s Uncarrier policies and low plan prices may help convince regulators to block any potential takeover bid from Sprint.  As mentioned earlier, T-Mobile’s Uncarrier initiative has gained a lot of attention.  Having four carriers allows for greater competition in the wireless industry.  Currently, AT&T and Verizon are nation’s two largest carriers, supposedly a ‘duopoly’ right now.  T-Mobile is threatening their way of business right now.  This is actually good for consumers are it pressures other carriers to rethink their business, sometimes it becomes worse.

Medley Global Advisors analyst Jeff Silva recently told Bloomberg Businessweek that a takeover bid from Sprint “would hit a lot of static from federal regulators and antitrust officials.”  Additionally, “[There isn’t] political appetite for seeing the national field reduced by one, especially if that one is a maverick carrier.”  From Silva and other analysts, we see that U.S. regulators will likely be inclined to prevent the acquisition of a carrier that offers low prices and other competitive programs that have clear and undeniable benefits for consumers. This is something that T-Mobile will definitely use in its defense.  Deutsche Telekom AG, the parent company of T-Mobile, has been eager to sell off the company for quite some time.  Before the Uncarrier initiative, T-Mobile was constantly losing customers and profits.  Late last year, T-Mobile reported that a total of 1,645,000 total customers added in the fourth quarter of 2013.  These were the best numbers T-Mobile reported in over 8 years.  Clearly T-Mobile is doing something right and this they can use to block a merger.

Lets not forget that Sprint is the one who blocked AT&T from buying out T-Mobile.  It’s quite hypocritical of them to go after T-Mobile after complaining and going after AT&T to stop the merger from happening.  In Sprint’s defense, AT&T is a much larger carrier than itself, so perhaps the company could come up with new ways to fight Verizon and AT&T for business if it merges with T-Mobile.  There are several things going against Sprint, such as non-compatible network.  T-Mobile runs on GSM network while Sprint is a CDMA network.

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Hamza Khalid

Hamza Khalid is the Lead Editor at The Jolt Journal. You're more than welcome to follow him on Twitter and follow The Jolt Journal on Twitter and Facebook. If you have any questions, concerns, or need to report something in this article, please send our team an email at [email protected]. This story may be updated at any time if new information surfaces.

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