Jeff Kagan: Would Sprint, T-Mobile be a Good Match?

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So, what would happen if Sprint (S) and T-Mobile (TMUS) got together? Sprint has wanted to merge with T-Mobile for several years. Then, regulators said no, but that resistance may be softening as the wireless industry continues to transform itself. So, let’s take a closer look at what a Sprint and T-Mobile merger would look like to the companies and to the entire wireless industry.

Today, the wireless industry has two sides. One side has AT&T Mobility (T) and Verizon Wireless (VZ). The other side has Sprint, T-Mobile and all the other wireless only players. We call this Tier One and Tier Two. The difference is often thought of in size of company with revenues and customers.

Today, AT&T and Verizon are Tier One. They are the two largest wireless carriers in the United States, but they are also in many different segments like wireless, wire line, gigabit speed Internet, television using IPTV, satellite TV and mobile TV and more.

Sprint, T-Mobile and other wireless carriers in the US market are Tier Two players today. They are also more of a wireless-only play. This does not limit their growth, but their paths may be different. That difference will continue with or without a merger.

Combined Sprint, T-Mobile Similar in Size to AT&T Mobility or Verizon Wireless

If Sprint and T-Mobile do merge, the industry would change. Today we have two large and two smaller competitors, and it would change to three large wireless carriers. While this would change the complexion of the industry, the rest of the industry would stay the same. It would still have two segments, Tier One and Tier Two.

A combined Sprint and T-Mobile would be roughly the same size as AT&T Mobility or Verizon Wireless. At that point, we would have three Tier One wireless carriers.

The wireless industry has changed and continues to do so. Technology has changed. Competition has changed. As this industry rapidly transforms, even regulators have now also changed. The clouds that got in the way of a Sprint, T-Mobile merger a few years ago may clear today, making the deal possible. That does not mean a merger is certain, but I would say it is more likely today than at any other time in the last few years.

Wireless Industry Continues to Transform

Regulators today seem to be business and growth oriented. They understand that the wireless industry is a huge investor in the USA. That’s good for jobs, taxes and healthy growth… something this nation has not seen much of in recent years. If you remember growth in the 1980’s and 1990’s, then you know what I am talking about.

The term, “a rising tide lifts all ships” means everyone wins – every sector, every industry and every competitor. That means high paying jobs are created. Investors are winners with existing companies and new innovative players. Wouldn’t we all welcome more, new companies like Apple (AAPL), Google (GOOG), Facebook (FB), LinkedIn (LNKD) and Amazon.com (AMZN)? That is a good place to be and I now see us moving quickly in that direction.

Why Let Sprint, T-Mobile Merge?

What about Sprint and T-Mobile? Why should we let them merge? Remember, there will always be differences between the top three companies, even if the merger is permitted. The differences will come from the makeup of the three companies. AT&T is going in one direction, Verizon is going in another. However, both are more than just wireless. There is wireless, wire line, gigabit speed internet, television and much more. Sprint and T-Mobile are still wireless only. That could change, but for now, that’s the marketplace. So, the top three players will take three different paths.

Who will lead this new company? Will it be Marcelo Claure or John Legere? Another good question. I think the new company would do well with either as CEO, however the company will be very different depending. Claure is growth oriented and Legere is over the top, but very successful as well.

These two executives may battle in the marketplace for market share, but they are both excellent leaders. Both have proven themselves to rescue their dying companies and turned them into growth companies. I have followed wireless for the last thirty years. One thing I am sure of, there will always be plenty to write about and talk about.

Who Will be CEO? Marcelo Claure or John Legere

Wireless is starting another reinvention. Like twenty years ago, when it switched from analog to digital. Like every few years when we moved from 2G to 3G to 4G and now to 5G. Like the wireless industry merged it way from dozens of tiny carriers to four majors and a handful of minors. Like ten years ago when the Apple iPhone and Google Android entered the scene and smartphones lead the way.

Changes have reshaped the industry many times over many years. Now we are getting ready for the next big wave of change and transformation. Now, Google not only sells Android through other handset makers like Samsung, but they also sell their own Nexus device. They also now operate as its own MVNO competing for carrier services against AT&T, Verizon, Sprint and T-Mobile. Google is both a friend and a competitor to other wireless companies in the space.

Tomorrow, expect the cable television industry with companies like Comcast Xfinity (CMCSA) and Charter Spectrum (CHTR) to try and re-enter the wireless space. In fact, I expect to see others enter the space in the same way. Will they be successful or not is the only question? They failed the first time around. So, did Amazon Fire Phone and the Facebook Phone.

Next Reinvention of Wireless Industry Has Begun

So, there are no guarantees what the wireless world will look like, but we see the direction the industry is heading in. And it’s a much more competitive and vibrant space than just a few short years ago. Things continue to change in this industry. That means regulators have to continue to re-evaluate where we are at any given point in the timeline. A decision that was right a few years ago may be wrong today.

That’s why I think Sprint and T-Mobile chance of winning approval to merge is better today than it has ever been. Now, we’ll just have to sit back and wait and see what happens next. As I said before, I’ve been in this industry for three decades, writing and commenting on the news, innovation, competition and industry changes. And I get a strong feeling things are only going to get stronger going forward. Stay tuned…

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