Analysts Predict Sprint, T-Mobile Merger Will Be A Massive Job Killer

from the synergies,-yo dept

For much of the year, Sprint has been trying to butter up the Trump administration to gain approval for a merger with T-Mobile. Sprint's previous attempts at such a merger were blocked by regulators, who correctly noted that reducing wireless competitors from four to three would raise rates and reduce carrier incentive to improve and compete. But with the Trump administration spearheading a new wave of mindless merger mania in the telecom space, Sprint is poised to try again, and is expected to formally announce its latest attempt to acquire T-Mobile in just a matter of weeks.

Of course like any good merger, that will involve countless think tankers, lobbyists, consultants, fauxcademics and other policy voices willfully ignoring M&A history, insisting that the deal will magically spur competition, save puppies, cure cancer, and result in countless thousands of new jobs. But many respected sector analysts are busy noting that the job is expected to be a mammoth job killer. How much of a job killer? One analyst predicts the merged company could result in more net job losses than the total number of employees Sprint currently has:

"Together, the companies reported employing 78,000 in their most recent disclosures. Sprint, based in suburban Kansas City, accounts for 28,000 of those, and T-Mobile for 50,000. Merging the companies, said a report by Jonathan Chaplin of New Street Research, could eliminate “approximately 30,000 American jobs” — which is more than Sprint employs.

Craig Moffett, another major Wall Street analysts, has previously predicted the net job losses could possibly be somewhere closer to around 20,000:

"Last August, (Moffett) put pen to paper and found reason to expect 20,000 job cuts from a merger. Moffett’s report showed most of those would be retail workers. Sprint and T-Mobile each want more retail outlets, but a combined company wouldn’t need as many stores as both have currently. It would make business sense to close stores near each other. “We conservatively estimate that a total of 3,000 of Sprint and T-Mobile’s branded stores (or branded-equivalent stores) would eventually close,” Moffett’s report said. Each of those, he said, would mean the loss of five full time jobs, or 15,000 jobs in total. A merger also would threaten “overhead” jobs, the kind concentrated in headquarters such as Sprint’s and T-Mobile’s in the Seattle area.

Of course that will be the precise opposite of the claims you'll start seeing over the next few weeks as the lobbying sales pitch for the megamerger heats up with the help of an often unskeptical media. Ignored will be the fact that the government's decision to block AT&T from acquiring T-Mobile helped foster some real competition in the space, resulting in the return of simpler, unlimited data plans. Also ignored will be the fact that the remaining three companies -- T-Mobile, Verizon and AT&T, will have less incentive than ever to engage in real price competition, potentially resulting in unlimited data being killed off again.

Most of these sales pitches will attempt to paint a picture where Sprint was going to collapse anyway, despite a deep-pocketed owner in Japan's Softbank -- and an improving balance sheet. But there are countless M&A options for the company that don't involve reducing competition in the space, including an acquisition by Charter and Comcast (who want to bundle wireless with cable and broadband service) or French-owned Altice, which has been gobbling up U.S. cable companies and has expressed its own interest in jumping into the wireless space.

Despite the obvious job losses and competition reduction, few expect the Trump administration to block the deal, since approving it will let the President, as is his tendency, proudly convince his loyal base he helped create jobs that technically don't exist. Sprint and its Japanese owner Softbank already paved the road for this bullshit parade earlier this year, when it let Trump falsely claim credit for thousands of Softbank jobs that technically may never arrive, and were announced long before Trump was even elected anyway.

In very 2017 fashion, expect none of this to matter once the merger sales pitch begins in earnest over the next several weeks.

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Filed Under: competition, jobs, mergers

Companies: sprint, t-mobile