Home - , , , - T-Mobile, Sprint Merger Would be Good For Carriers, Not So Much For Customers

T-Mobile, Sprint Merger Would be Good For Carriers, Not So Much For Customers

For months we've been hearing that a merger between Sprint and T-Mobile could be announced soon. The latest rumor, published today by Reuters, reports that unidentified "people familiar with the matter" believe that the two carriers are close to agreeing on the terms of the deal.

Previous rumors had suggested that the main unresolved issue was the stock exchange ratio (how many shares of the new company Sprint and T-Mobile shareholders would receive), so perhaps that's been decided. Reuters' sources say the proposed deal would be an all stock transaction and that T-Mobile and it's shareholders would hold a small majority of the shares with Softbank and Sprint shareholders holding the rest. That would put T-Mobile in the driver's seat with T-Mobile CEO John Legere expected to lead the combined company.

A merged T-Mobile and Sprint would have 130 million customers, just shy of AT&T's 132 million and Verizon's 143 million. Acquiring Sprint would give T-Mobile lots of new 2500 Mhz spectrum. Sprint holds roughly twice as much spectrum as T-Mobile in most markets. The added spectrum will allow T-Mobile to dramatically expand both capacity and coverage. But Sprint hasn't built out most of its spectrum and deploying it will be costly. On the other hand, there should be cost savings for the combined company from closing redundant stores and call centers and laying off excess employees.

Of course the deal is not a sure thing. Even if the companies agree to merge, the deal will need to be approved by the FTC, FCC and probably a few other agencies. Although approval seems likely under the current administration, the process will take time, probably about a year and the merger process can't actually begin until the deal is approved by the Feds. After regulatory approval it will take time, at least two years, to combine to two companies' networks and their financial, sales and support systems.

With T-Mobile calling the shots, it seems likely that the Sprint, Boost and Virgin Mobile brands will disappear. Some Sprint and Boost stores will become T-Mobile or MetroPCS ones but others will be closed.

AT&T, Verizon, Sprint and T-Mobile's stock prices all rose today and rightly so. Going from four to three national carriers will reduce competitive pressure, and that means a slowing or ending of the current wireless price wars.

Sprint has literally been giving away service lately as it struggles to maintain market share and T-Mobile has done it's own share of aggressive price cutting over the last four years. The combined T-Mobile and Sprint will be saddled with nearly $60 billion in debt and will need to borrow more to build out all the spectrum it acquired in the 600 Mhz auction and from Sprint. With Sprint gone and T-Mobile saddled with debt and busy absorbing Sprint customers and resources, I don't expect to see much in the way of price cutting after the deal is finalized.

In the end, I think T-Mobile will become a much stronger and more profitable company and the US Telecom industry will be a more stable business. But ultimately customers are likely to see higher, or at least not lower prices.

Sources: Reuters, BGRVice News

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89 comments:

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  1. This merger will likely widen the "digital divide." Sad....

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    1. It will most likely do just that!

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    2. There's no reason to believe that it would.

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    3. I agree with the dead hoarse guy.

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  2. Why would a stable company like T-Mobile want to take on $60 billion of doubt?

    The costs of paying off that doubt will be passed on to their customers.

    I'm a happy T-Mobile customer but if their prices end up no cheaper than AT&T or Verizon, then I might as well switch to one of the big two. After all, no matter how much T-Mobile expands their network, it will never be as big as the AT&T or Verizon networks. And the Sprint network won't expand T-Mobile's coverage in any meaningful way so it will just be shut down.

    Not even the cable companies or Dish wanted to buy Sprint.

    With higher costs to customers and coverage that can never match AT&T's or Verizon's, T-Mobile seems to lose its value proposition.

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    1. Only about half the debt will come from Sprint. T-Mobile already has 28.5 billion of its own debt. The appeal of the merger to T-Mobile is lots of spectrum, the elimination of a competitor and 53 million customers.

      T-Mobile just spent $9 billion for a 40 mhz of 600 Mhz in most markets. Sprint has 120 to 140 Mhz of spectrum nationwide so the spectrum alone is worth $30 billion.

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    2. Last time I saw spectrum maps (pre-600,) there was quite a bit of overlap between Sprint's and T-Mobile's holdings, which might be great for bandwidth, but not necessarily for coverage (a weak point for both carriers.)

      But regardless, I don't see this merger happening without the FCC (read: Verizon and AT&T) forcing SprinT-Mobile to divest some spectrum, or at least sell it. I can see S-T getting rid of some 850 MHz spectrum then (including maybe the Myrtle Beach band 5 license?) because they have 700a (however little it is) and 600 (20x20 average.) Band 2 could maybe become a subset of band 25 and maybe an MFBI type of a situation could work out. Band 41 would be really interesting though, because Sprint has a LOT of it, but it's relatively unique in this part of the world and pretty useless coverage-wise.

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    3. "I'm a happy T-Mobile customer but if their prices end up no cheaper than AT&T or Verizon, then I might as well switch to one of the big two"

      If they were exactly the same price as AT&T but still has the international benefit that the others do not have, I'd keep them for sure.

      If you want a great network, well, you do have to pay for it. And with Sprint we are to the point of paying next to nothing for a tiny slow network that is worth next to nothing.

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    4. "With higher costs to customers and coverage that can never match AT&T's or Verizon's, T-Mobile seems to lose its value proposition."

      Also, with the 600 mhz to be deployed within a couple of years, the "never match" claim will expire.

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    5. "$60 billion worth of doubt" is as apt a description of Sprint as I have ever seen.

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    6. How do you get rid of $60 billion of doubt? You get rid of it with $60 billion in faith.

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  3. I say it depends. Legere is a maverick. I see him price dropping at least until the new T-Mobile is number 1 in subscribers. After that the other two will have to battle much like Sprint of late to maintain.

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    1. Yeah, no. Just look at the ReCarrier moves T-Mobile has been making of late even without picking up the ~60m customers Sprint will bring. The merger will only make things worse.

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    2. I've very glad for ReCarrier. To me, UnCarrier meant, that unlike a real carrier, T-Mobile had hardly any coverage. Those days are gone, Thank Heaven.

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  4. Nooooo.. Not my Boosty!! :(

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  5. Sprint is Junk. I am mystified that another entity wants to absorb this dead horse.

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    1. ~60 million customers+spectrum. The names/brands/management can always go.

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    2. debt? bad faith tied to it all? just a bad deal. sprint was never allowed to die a natural death in the spirit of survival of the fittest.

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    3. ....are you saying Sprint is a zombie?

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  6. Read this logical discussion of a possible merger:

    https://www.pcmag.com/commentary/356308/dont-let-the-sprint-t-mobile-zombie-merger-rise-again

    Lost jobs in the USA; worse customer service, higher cost plans for consumers, Wall St wins and we lose !

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    Replies
    1. The piece is a low-grade rant. First sentence: Profiteers gotta profit.

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    2. Yes that's a great article and I agree with almost all of it. The author Sascha Segan, has been covering the US mobile scene for at least 30 years and is articulate and knowledgeable.

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    3. Do you agree with it because it's great, or is it great because you agree with it?

      Yes, that was rhetorical. Although the points are obvious enough--job loss, less competition, etc--it's a garden-variety rant with poor reasoning, some of it made-up. For example, "Sprint has been doing great recently." (paraphrase) Really? So that's why it's giving away free service to everybody?

      I've read PCMag for longer than 30 years, and BYTE before that. Nostalgia is nice, but all of the personalities that made PCMag what it was are long gone.

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    4. I reminisced a bit as I typed up the above response, so I went in search of some of the names of PCMag yore. Bill Machrone was one. I'm saddened to find that he has passed away last year.

      http://pcmag.com/article/349186/remembering-pcmags-bill-machrone

      Here's a moment of remembrance to you, Mr Machrone.

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    5. "Lost jobs in the USA"

      If the jobs only exist due to government intervention, they aren't sustainable anyway.

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    6. Good write up. Econ 101 of less consumers options = higher prices. Merger takes 3 years to integrate-n-consolidate is realistic as projected from previous industry experiences. All sound reasonings.

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    7. @e.mote I had subscriptions to PC Magazine and Byte for many years too. Both were great back in the day. Byte's Jerry Pournelle also passed away a few weeks ago. I used to look forward to reading his Chaos Manor column every month.

      Regarding Segan's post, it was a a rant, but I love a good rank. Agreed that Sprint is not doing great and that Segan's comparison of US and Canadian mobile prices ignored factors like regulation and population density that would have weakened his argument.

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    8. "Good write up. Econ 101 of less consumers options = higher price"

      It's a bit of a stretch to call Dead Horse Wireless... erm.. Sprint any sort of "option".

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    9. "Regarding Segan's post, it was a a rant, but I love a good rant."

      I can tell... You keep this site going, don't you?

      ;-)

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    10. " Econ 101 of less consumers options = higher prices. Merger"

      Except it doesn't necessarily follow at all. I always see,for example, small town movie theatres with no competition around for half the price of movies in areas with many competitors close by.

      There might be reason to guess what you are saying, but there's simply no reason to assume the prices will be higher "just because".. with no evidence.

      Besides, the real competition for the last three years has been between AT&T, T-Mobile, and Verizon. The merger of T-Mobile and Sprint does not change this dynamic at all.

      In other words, we have had two big dogs and a half-grown scrappy magenta terrier fighting for the US mobile market. And Sprint is the sick runt of the litter that really no one gives a thought to.

      But if the terrier gets added strength from being able to eat all of Sprint's Puppy Chow, it has more strength to fight against the two Saint Bernard's.

      There is more reason to guess that the consumers will benefit from this then there is reason to believe that the consumers will be harmed.

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    11. >Regarding Segan's post, it was a a rant, but I love a good rant.

      I don't. I think the biggest problem of today is too many people ranting, and not enough people listening to each other. To wax political for a moment, from the public discourse, one'd think that the biggest enemies we have are each other, and not Russia/China/ISIS/etc. It's a scary thought to think about this country's future.

      I prefer to see an issue for what it is, rather than what I wish it to be (descriptive vs normative), as my bias gets in the way of the latter. Re: Job loss - It's an inevitable consequence from better efficiency. To argue that a merger shouldn't happen because it'll lose jobs means that there'll never be a merger, and we should all praise inefficiency. It's a bad arg.

      Re: Lessened competition - As others pointed out, going from 4 to 3 doesn't necessarily mean higher prices, if TMO can be on equal footing with ATT/VZW. I'd agree that yours is more likely, just not necessarily. Reality is complicated, and nobody has a perfect crystal ball to predict the future. Sprint can't go on like this, so an M&A is inevitable regardless.

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  7. Only 3 national providers in Canada. Much higher pricing than USA, with our 4 national providers.

    This 'proposed' merger is Bad for the consumer !!!

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    1. Canada is a useful example of a less competitive market. But I don't think US prices will ever get has high as Canada's. In addition to a lack of competition, Canada has a population density that's 1/10th of the US so there are a lot fewer customers per square mile or km to pay for the network.

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    2. Canada's high prices are not caused by the lack of national carriers. The carriers do not want to license MVNOs, and Canada's regulators won't force them to do this. Ting is a Canadian company and cannot get a MVNO agreement in Canada. There is an excellent discussion of this on the Ting website, and a video of the Ting CEO testimony before Canadian regulators about this issue.

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    3. I don't see Tiny being blocked in Canada meaning high prices there... Tung is known for very high prices in the US, after all.

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    4. Ting's US prices are considered low in CA, where the 3 oligopolies and their sub-brands control 90% of the wireless market, and most of the rest are small, regional networks. TextNow is another Canadian company that has been blocked from getting a MVNO agreement. There are some small, regional MVNOs, but you don't see low-cost, nation-wide MVNOs because the big 3 want control, not wholesale revenue. Rogers just got the CRTC to agree that they can block Sugar Mobile from roaming on their network, despite a roaming agreement with their parent company that serves Northern Canada. This will probably put Sugar out of business. The Innovation Minister has told the CRTC to reconsider, but even if they change the ruling, it will take years before any MVNO competition occurs. It took 6 years after a regulatory ruling before cable companies opened access. These companies hire ex-government officials and spend a lot on lobbying to protect their high revenues.

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  8. Will the sprint cdma bands disappear making sprint/boost handsets obsolete?

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    1. Most of Sprint's recent flagships, mid range phones and even some low enders already support GSM, UMTS and LTE bands 12, 4 and 2. If Sprint and T-Mobile can unlock them they will work better on the combined T-Mobile and Sprint network than any of T-Mobile's current phones, none of which support Sprint's LTE bands.

      Full integration of the T-Mobile and Sprint networks will probably take at least three years and by that time most customers will have already replaced their phones so it might be cheaper and easier for for T-Mobile just to give customers new cheap phones than to unlock their old ones.

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    2. Yes.

      Just look at how T-mobile assimilated MetroPCS.

      The CDMA network was shut down, the spectrum was repurposed, and everyone was sold new phones at comparable prices with even better coverage.

      MetroPCS stores stayed open since then, and they've remained a fairly competitive and well-maintained part of Big Magenta.

      Presumably, Sprint and all its subsidiaries/MVNOs will be transitioned over to GSM as well, while also gaining access to a whole new market of BYOD customers.

      The naysayers think this will reduce competition, but it'll actually result in an across the board increase in the competitiveness of both Sprint AND all its subsidiaries/MVNOs.

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    3. I agree. CDMA is flyblown dead donkey in a field. It even drags down Verizon. T-,Mobile has a proven track record of getting rid of this outdated tech when it can.

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  9. Would this merger end Sprint's bad unlock/whitelisting policy for their phones? That could be a plus, but overall less competition isn't a good thing in this industry, as in the cable industry too.

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    1. They should, but T-Mobile kept MetroPCS' CDMA-style binding of SIM and IMEI when they switched Metro from CDMA to GSM.

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    2. There are several ways this merger can improve the experience for customers of both.

      Np one has offered any downside to this other than unfounded predictions.

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  10. Once FCC refused it why they starting to discuss again? Not worth it.

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    Replies
    1. Today's FCC is more carrier friendly.

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    2. @anonymous 10:45.. I agree. I think we should all see how this pans out before it's thrown before the train.

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    3. I just hope the Feds block it right away. I don't want to have this potential merger hanging over my head.

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    4. There's no reason for the Feds to block it, other than the arrogance of those in the Federal government who view the economy like Pugsley Addams views his toy train set.

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    5. Data speeds are going down with unlimited plans. Removing one of four cellular pipes will result in even more traffic on the remaining three. This merger is not just bad for competition and jobs, it could easily reduce or eliminate many Americans ability to connect to the internet. It needs to be promptly blocked.

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    6. "Removing one of four cellular pipes will result in even more traffic on the remaining three."

      More FUD. It seems far more likely that T-Mobile will KEEP and EXPAND coverage thanks to taking over Sprint.

      If you are so concerned about pipeline, where is the complaint about Sprint hogging all that spectrum and refusing to use it for all these years?

      Now the spectrum will be utilized, and the pipeline will allow a lot more "flow"

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    7. If T-Mobile really wants to expand coverage with Sprint's spectrum, they need to pursue an agreement where they can use Sprint's spectrum in exchange for allowing Sprint access to T-Mobile hardware. That way both companies could benefit and competition is preserved. Make no mistake, this merger is about elimination of a competitor.

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  11. Sprint is on life support anyway, If T-Mo doesn't buy them, they would eventually gone under and T-mo would had face AT@T and Verizon as a much smaller Co. Again 2 behemoth.

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  12. Watch this get rubber stamped by Pai and the FCC like the Amazon/Whole Foods was by the FTC.

    Hopefully T-Mobile will still honor their "if you like your plan, you can keep your plan" promise.

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    Replies
    1. "Watch this get rubber stamped by Pai and the FCC like the Amazon/Whole Foods was by the FTC."

      I can't see why not. If you look at the mission statement of the FCC, matters like this fall entirely outside of the purvey of this agency.

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    2. "matters like this fall entirely outside of the purvey of this agency."

      Well in that case, they should abstain from an giving an opinion either way, right? Not going to happen.

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  13. Maybe I am just not informed but how will a 2600 mhz frequency help Tmo?
    Such high frequencies will not penetrating buildings, which TMO has been having trouble forever with.

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    1. With higher frequencies signals don travel as far so towers need to be closer together. A benefit of more towers closer together is greater network capacity and/or greater speed. The same capacity and speed can be achieved with low frequencies because the towers interfere with each other if they are two close together.

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    2. More capacity for folks on the go means better speeds for those in buildings, since lower frequencies will be less crowded.

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    3. Speed, especially when part of a carrier aggregation scheme.

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  14. >how will a 2600 mhz frequency help Tmo?

    Small cell deployment, ie boxes attaches to streetlights & poles. The industry is already testing millimeterwave (mmwave, 30-300GHz) for 5G, as well as CBRS (3.5GHz) and of course 5GHz, so propagation for short-wavelengths are taken into account.

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  15. Man this would essential kill prepaid deals for customers, I own a few boost stores, We give away phones all day long to metro and tmobile customers, We have best priced plans in industry and if great service now with LTE PLUS. But if this happens expect your cell phone bill to rise at least 50% over next five years, With no sprint and tmobile trying to ONE up each other on price all the time, Prices would naturally rise and atat, verizon, and new SPrint/tmobile would be so happy and all customers would lose horribly. On top of all boost sprint store owners would lose everything we have built, More jobs over seas and less here for americans.

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    1. "great service now with LTE PLUS."

      Great in your mind only. Boost hardly works anywhere.

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    2. We've had mergers for years and prices keep plummeting. There's no reason to believe that this won't keep happening when "dead as a Dodo" Sprint gets eaten.

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    3. Boost store front people are the stupidest ever ... I had one of them insist to me that Boost used an entirely different network than Virgin did, and Virgin wasting by a British stand up comedian.

      If you must get Boost, go too Walmart or get it online.

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    4. Dealers have too poor a reputation for anyone to care.

      From lying about promos to nickel and diming customers, nobody actually likes dealing with dealers' BS.

      That, and Boost dealers should've already transitioned to Cricket or MetroPCS once it became clear that Sprint was a sinking ship.

      On a related note, the ratio of dealers to corporate is completely fubar.

      If there's one thing there really needs to be more of, it's genuine no-nonsense corporate stores.

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    5. If it takes a merger like this to get rid of the a scourge of Boost storefront dealers, so be it.

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    6. Or the Boost dealers could all find employment as Rourke's of their own "Fantasy Island", in white suites welcoming you to a fantasy land where Sprint is 99% as good as Verizon, rival MVNO divisions are run by chuckling British comedians. and phone handsets flitter through the air above on white wings.

      "Welcome to Boost fantasy island, where the coverage is great!"

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  16. Hi Dennis, do you know if Metro discontinued hotspot on their $50 and $60 dollar plans? Both are now saying no tethering.

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    1. Just another re-carrier move by TMO, kind of like merging with Sprint to eliminate competition.

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    2. The $50 unlimited data plan never had hotspot. The old $50 8 GB plan did. The $60 plan does include hotspot, throttled after 8 GB as shown on No Contract Phone Plans - Unlimited Data, Talk and Text - MetroPCS®.

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    3. "Just another re-carrier move by TMO, kind of like merging with Sprint to eliminate competition."

      The stinking fish that is Sprint isn't competition to anyone.

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  17. If the fish was not any competition they would be chopping it up for stew and just eating the tasty pieces instead of leading it to the altar.

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    Replies
    1. On the late June windshield of the US carrier market, Sprint is a smashed dragonfly.

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  18. @Dennis, when I go to that link and choose the $60, it says no tethering.

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    1. I can't reproduce that. On both mobile and desktop when I choose the $50 plan it shows that the $60 plan includes hotspot in three places including the big blue box at the top of the page that reads "$60 UNLIMITED 4G LTE DATA + HOTSPOT".

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  19. Replies
    1. Could they be making a distinction between tethering and hotspot?

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  20. @anonymous 5:44pm.. Thought they were the same thing..

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    1. Tethering can mean wired (USB) tethering. However, I can't think of any reason why a carrier would prohibit USB tethering and allow hotspot. Given that the page says hotspot is allowed in three different places, I think the no tethering statement is a copy paste typo.

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  21. @Dennis you have to be right about the copy paste error.

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  22. FCC "says", U.S. wireless market is sufficiently competitive Source: Fiercw Wireless - http://www.fiercewireless.com/wireless/u-s-wireless-market-sufficiently-competitive-fcc-says

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    Replies
    1. Really? What does the FCC say about the ISP/cable market?

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    2. Nothing, as long as the checks keep coming in.

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  23. Just wanted to echo what others said about boost dealers. In my area ALL Boost dealers are operated by people who speak English poorly. They never honor the Boost dealer only promotions.

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  24. Report: DOJ Staff Likely to Oppose T-Mobile, Sprint Merger Source - https://www.wirelessweek.com/news/2017/10/report-doj-staff-likely-oppose-t-mobile-sprint-merger

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  25. Does anybody think that we would have more effective competition if Sprint fails and T-Mobile has to compete with the duopoly alone? Would Legere overnight say: "Cancel the uncannier moves; there are only 3 of us now?" Or are the Sprint comments "fake predictions" of Doom, just another form of Sprint bashing?

    If you really want to stop the merger, just pay Jerod Kushner to 'borrow' T's iPhone and send out this:

    “Sprint and T-Mobile, two failing foreign-owned companies, think they can merge and take 20,000 American jobs. Regulators have been too soft for years. Bad Deal!”

    ReplyDelete
  26. Update: Sprint and T-Mobile aim to merge without giving up any assets Rueters via Phone Arena - https://www.phonearena.com/news/Sprint-and-T-Mobile-aim-to-merge-without-giving-up-any-assets_id98949

    ReplyDelete
  27. Sprint, T-Mobile Deal Announcement Is Likely to Be Delayed - https://www.bloomberg.com/news/articles/2017-10-19/sprint-t-mobile-deal-announcement-is-said-to-likely-be-delayed

    ReplyDelete
  28. Sprint, T-Mobile scratch earnings calls as merger speculation reaches fever pitch - Fierce Wireless http://www.fiercewireless.com/wireless/sprint-t-mobile-scratch-earnings-calls-as-merger-speculation-reaches-fever-pitch

    ReplyDelete
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