Jeff Kagan: Why T-Mobile, Sprint Are Showing They Are Weak

Images: iStock.com / Tak Yeung, TennesseePhotographer

Desperate times call for desperate measures. That suddenly seems to be the motto at both Sprint S and T-Mobile US TMUS in their efforts to get their merger approved. They have both started pointing to their network weaknesses in order to win approval. If it works, it’s a great idea. But if it doesn’t, they are giving their competitors a list of their self-proclaimed weak spots to tear them apart.

Over time I have been saying how AT&T Mobility T and Verizon Wireless VZ are the two industry leaders with regard to innovation, profitability, network reach, network speed, keeping their customers happy and so much more.

Over that same time, I have said that T-Mobile was growing, but was a distant third, and Sprint was failing and getting lost in the competitive mix. Then the industry started to focus on 5G, and suddenly the companies realized they were both out-gunned.

T-Mobile was talking so much they made it sound like they were bigger than life. Now we are learning that as the industry moves to 5G, they are in a weaker position. They need this merger for Sprint Spectrum, if nothing else.

The funny thing is, there seems to be two competing stories about T-Mobile. One is that it’s bigger than life when it comes to talking to the marketplace. The other is about a company under the gun, with little spectrum unless it merges with Sprint.

As industry moves to 5G, both T-Mobile and Sprint need to merge

Today, both T-Mobile and Sprint are pleading with US regulators to get the deal done. At this point, I don’t see either one walking away until the deal is either approved or denied.

The reason they are not going to walk away is simply because they both need this deal more than anyone realized.

Regulators have recently said that the deal as currently positioned would not be approved.

That does not mean the deal won’t be approved. It just means there will have to be changes to satisfy regulators. What changes?

As currently positioned this merger will not be approved

Either T-Mobile and Sprint can talk to regulators using this desperate language describing their networks and their companies, and they can hope for the best…

…Or, they could simply ask regulators what it would take to get the deal done. That seems to be the best solution.

Since the beginning, I thought this merger made sense from the perspective of T-Mobile and Sprint. I still think that way. There are pros and cons, but the bottom line is this. Neither can make it alone as the industry shifts to 5G.

It may be best to let T-Mobile and Sprint merge

We are better off with three real competitors, rather than two strong ones and two weak ones.

At this point it’s a matter of regulators looking at this deal from the right angle. Unfortunately, they are looking backwards. Looking that way there is no reason for this merger. However, looking forward, at the enormous investment to bring 5G to reality, this deal makes sense.

If regulators won’t look at this deal from the right perspective, however, the only question left for T-Mobile and Sprint to answer is this. They should simply ask the regulators what it would take to get the deal done.

If the regulators will give them a clear path to get there, then I believe this deal will eventually be approved. If not, well then T-Mobile and Sprint will go their separate ways. They will struggle to adapt and transform as the industry moves to 5G.

What happens to T-Mobile, Sprint if merger is not approved

In that case the industry will have two strong and two weak competitors. And they will have to compete separately after giving their competitors raw information on all their weak spots. Yes, I think these two companies will have to merge. If not, the bloodbath in the marketplace may get very messy.

If not, Sprint and T-Mobile could be acquired by other players like Comcast Xfinity Mobile CMCSA, Charter Spectrum Mobile CHTR, Altice Mobile ATUS, Google Fi GOOGL or any other company wanting to get into the US mobile space.

Today these companies are MVNO players – mobile virtual network operators. Are they at the point where they would want to acquire a wireless player? And there are plenty of other companies thinking about that opportunity right now. Remember how Masayoshi Son, Chairman of Softbank SFTBY acquired Sprint several years ago? That kind of thing could be getting ready to happen once again.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at [email protected]. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan.