Competition Dodges A Bullet As T-Mobile, Sprint Merger Dies

from the phew dept

In the end it wasn't regulators, but giant international egos that derailed Sprint's latest attempt to acquire T-Mobile. As last week's rumors had suggested, T-Mobile owner Deustche Telecom and Sprint majority owner Softbank couldn't agree on terms of the latest attempted megamerger, formally calling off the deal over the weekend. At issue, apparently, was the fact that T-Mobile wanted greater control over the merged company in the wake of the deal. Company executives wanted to keep T-Mobile's momentum, which has resulted in bigger net subscriber gains per quarter than any other U.S. carrier, intact.

The failure is good news for consumers, employees, and business customers alike. Wall Street had estimated that the deal would have killed between 10,00 and 30,000 jobs -- potentially more positions that Sprint currently even has. Telecom history suggests that the reduction of major competitors from four to three would have also had a profoundly-negative impact on overall competition (go ask a Canadian). As a result users not only likely would have seen higher rates, but the end of the recent resurgence in unlimited data plans -- only made possible by T-Mobile's competitive disruption of the market.

In a joint statement, the two companies pay a little empty lip service to the supposed "consumer benefits" of the deal, before promising to get back to upgrading their networks and competing:

"The prospect of combining with Sprint has been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders. However, we have been clear all along that a deal with anyone will have to result in superior long-term value for T-Mobile’s shareholders compared to our outstanding stand-alone performance and track record,” said John Legere, President and CEO of T-Mobile US, Inc. “Going forward, T-Mobile will continue disrupting this industry and bringing our proven Un-carrier strategy to more customers and new categories – ultimately redefining the mobile Internet as we know it. We’ve been out-growing this industry for the last 15 quarters, delivering outstanding value for shareholders, and driving significant change across wireless. We won’t stop now.”

The death of the deal is perhaps extra good news for T-Mobile CEO John Legere. Legere has spent the last few years fashioning himself as a massive consumer ally (except for that whole opposing net neutrality and mocking the EFF thing), dropping F-bombs, and making fun of AT&T and Verizon. Selling consumers on a deal all-but guaranteed to devastate sector jobs and price competition would have required some PR acrobatics that challenge the laws of physics.

The death of the deal is ironic, given that Sprint will not likely have a better chance at getting regulatory approval. Softbank and Sprint spent the better part of the year buttering up the Trump administration, going so far as to let Trump take credit for Softbank job promises he not only had absolutely nothing to do with, but which were announced months before Trump even became President. Given the rubber stamp nature of the current FCC, the chances of regulators doing the right thing and stopping the job and competition-killing deal were far from certain.

Fortunately for consumers, fussy international egos derailed the deal before regulators had a chance to downplay how bad a deal it actually was. Sprint can now turn its focus toward striking deals with other companies like Altice and Charter; deals that won't erode the overall level of competition in the wireless sector.

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Filed Under: antitrust, competition, consolidation, fcc, mergers

Companies: deutsche telekom, softbank, sprint, t-mobile