T-Mobile, Sprint about to turn U.S. mobile market into a threesome

by Steve Blum • , , ,

Update: the deal is done.

The competitive mobile broadband market might not be as red in tooth and claw in the near future. According to several media outlets, T-Mobile and Sprint, the number three and four mobile carriers in the U.S., are on the verge of announcing a merger. It’s the second time they’ve gone down this path. According to CNBC, this time it’s because the competition is too much for the smaller Sprint…

Talks most recently broke off late last year after SoftBank CEO Masayoshi Son decided he didn’t want to lose control of a combined company. Deutsche Telekom will own more than 40 percent of the new company, with SoftBank’s ownership just below 30 percent.

Several things changed over the last few months that led Son to change his mind, including greater synergies from lower corporate taxes, an increased understanding of how much 5G deployment will cost Sprint, and a rapidly changing competitive wireless landscape that now includes cable providers.

The big question – besides will they do it – is whether the federal government’s antitrust watchdogs will allow it. They scuppered AT&T’s 2011 attempt to buy T-Mobile because they deemed it anticompetitive. Duh.

This deal is more complicated. Arguably, a combined T-Mobile and Sprint would be a more formidable opponent for Verizon and AT&T, number one and two in market share with 35% and 33% respectively. Combined, T-Mobile and Sprint would have 30%, and be worth $26 billion.

On the other hand, it was the unlimited rate plans offered by the two smaller companies that forced the big boys to follow suit last year. Whether the merged company, with a market nearly even with the leader, would share have the same manic drive to catch up or would simply relax into a comfortable oligopoly is the key antitrust issue.

The marriage announcement, if it comes, is expected later today.