Handelsblatt, a Germany-based business news publication, Deutsche Telekom (which owns T-Mobile) appears to be finalizing its official merger offer for Sprint (owned by Softbank). Citing unnamed sources close to top executives from Deutsche Telekom, Handelsblatt reported that the T-Mobile-Sprint merger will be done through an all-stock deal.
If the all-stock transaction does push through, T-Mobile’s parent company would be in a good position to not only save on costs but also benefit immensely from the scale of the resulting merged business entity without having to expend billions of dollars. As projected by Moody’s Investors Service report, a T-Mobile-Sprint merger could translate to cost savings of $3 billion for Deutsche Telekom.
In terms of scale, the combined spectrum holdings of the two major US wireless carriers would be massive, allowing the resulting merged entity to aggressively price its mobile offerings. T-Mobile and Sprint are currently the third and fourth biggest carriers in the US market, behind only industry leaders Verizon Wireless and AT&T. If merged, T-Mobile and Sprint could form a two-headed monster that will challenge the duopoly’s dominance.
But some believe that having three national wireless carriers instead of four poses some risks to the industry. Among the Big Four, Sprint is considered by many as the most affordable, and its presence in the market is perhaps the only thing that pressures T-Mobile to keep its pricing below that of Verizon and AT&T. BGR cites Canada as an example -- the country only has three national carriers, and its consumers on average pay some of the highest wireless costs of any mobile market in the world.
Although the US and Canada have similar demographics, there is no guarantee that the former will transform into the latter in terms of wireless costs. And it is worth remembering that the deal has not been made official yet. And if it does become official, any merger will still be reviewed extensively by the US government.