I really hope this doesn't go through. T-Mobile has been great for me, and shed a lot of the anti-consumer policies of the other carriers. I'd hate to regress.
With DT owning only 20% I doubt the brand would be T-Mobile. Most likely it would be Sprint branding and look n feel with largely T-Mo management. Will be interesting to see what happens to Bellevue as I suppose the combined co might be run from Overland Park.
Agreed. Sprint is by far the bigger brand in the US. Although if this was even 1 year later it might be more of a toss up as T-Mobile has done great things to enhance the markets perception of them.
Well I'd argue that T-Mobile is clearly the 'preferred' brand in the market. Just kind of doubt it would make sense to brand it that way when T-Mo Intl only owns 15 or 20% of it. Who knows - maybe they come up with a new brand even (like EE for T-Mobile/Orange in the UK)
One of the nice assets you acquire when you merge is the option to use whichever brand will work best in front of consumers, no matter how small a player it actually is.
I don't know why T-Mo Int % of ownership matters one way or the other. The BOD of the new combined company would say "Ok, which brand is better to go with?" The only way I can imagine T-Mo Intl having an impact is if they specifically wanted to forbid it being called that for their own brand reasons. That might include fear that the US will screw up and drag down their brand overall. Or they may want to try again here in 5 or 10 years and use T-Mobile then etc.
It matters when you see how long DT wanted to get out of the US market. With a small ownership it's just a question of time when they get rid of that too, because frankly you have no control with that percentage. So if you don't control the entity and have no interest in it in the first place (thus the multiple tries to sell it), why tarnish your brand with something that is out of your hand and control?
"Deutsche Telekom may also be more accommodating with Softbank regarding a break-up fee than it was with AT&T, the sources said. That is because T-Mobile is likely to be the surviving brand and its CEO, John Legere, is likely to lead the new combined company, thus avoiding a loss of subscribers and momentum it had to contend with during the drawn out regulatory process with AT&T, two of the sources said."
I feel like it could have benefits, but like you I lean pessimistic.
I had a deeply discounted unlimited plan with Sprint (a couple family members worked there).
I left when T-Mobile offered a lower price for unlimited web + text. The only people I know who use voice use OTT services for it anyway. On top of that, T-Mob offered BYOD, letting me run pure Android, without all of Sprint's then unremovable NFL, NASCAR, and Facebook apps. It beat Sprint's employee discount plan for me, and easily.
My family members who work there were frustrated by the news. They mostly rationalized by bashing T-Mobile, claiming their prices were unsustainable, arguing it must be a risky, poorly run business.
I think those prices are only unsustainable when you have a major carrier's assumptions. Assumptions about acceptable levels of overhead and expected levels of profit.
I think Sprint did some really bold things in its history. It fought the good fight as MCI against an entrenched telecom monopoly, back when sentiment was against them, when legislators were literally talking up how wonderfully efficient the telecom monopoly was.* Today I feel like T-Mobile is more like the scrappy startup that benefits consumers primarily by running aggressively trim.
Unlike others posting here, I've never had any network issues with T-Mobile, and had routine congestion based or coverage based issues with Sprint. But that doesn't really matter. A larger network could offer more redundancy, and faster speeds on both sides of the network.
Historically though, conglomeration of telecom companies has reduced competition, and essentially led to monopoly rents for a service that is especially susceptible to price competition. (There's a reason they try to lock you in with contracts. Competition is the enemy.) Here, I worry that Sprint's management has noticed that T-Mobile is unlike other competitors, AT&T, and is competing on price, setting a dangerous precedent. I worry they're trying to squash this unruly behavior through the purchase.
Potential benefits might be nice, I just worry the downside risk is very large.
"I think those prices are only unsustainable when you have a major carrier's assumptions. Assumptions about acceptable levels of overhead and expected levels of profit."
And assumptions about acceptable levels of service and coverage. I'm saying that as a loyal T-Mobile customer, but it's readily apparent that when I visit my parents in my small home town, or drive a few hours east to the beach towns near me, or really go anywhere much outside a major city, my service is poor or non-existent, and my Verizon-customer friends' service is fine. I'm okay with that because I live in a big city, don't go to small towns often, and think the mediocre coverage is worth it for the lower price, but there's definitely a "you get what you pay for" aspect to all of this, at least in my experience.
> I'm saying that as a loyal T-Mobile customer, but it's readily apparent that when I visit my parents in my small home town, or drive a few hours east to the beach towns near me, or really go anywhere much outside a major city, my service is poor or non-existent, and my Verizon-customer friends' service is fine.
Yeah, I think more testimonials are on your side here, so I don't doubt that T-Mobile subscribers face this issue, but it's strange to me, because I had exactly the opposite experience in reliability. Moving from Sprint to T-Mobile improved my reliability considerably.
Sprint would claim I had full bars, but downloads would stall out, webpages would just die half loaded. This was near their headquarters in Kansas City. T-Mobile's network has never crowded me off line, and has worked for me fairly consistently on the east coast.
Neither seemed to work very reliably in the long rural gaps between Kansas City and other metropolitan areas at the time. (Though I hear Sprint has I-70 covered fairly well now.)
I think part of my experience is driven by the fact on the spectrum of "voice user" to "web user," I'm really far to the right, probably outside of the mainstream. Could be T-Mobile's investments in data have come at the expense of their voice reliability? I'm not sure...
I guess if the main issue is T-Mobile's lack of coverage, then on net, things will improve after a merger. If the main concern is Sprint over-selling their network so that it becomes congested and unusable around 6 PM, then a merger is mostly just going to make things worse. It will be better in the short term, but as Sprint takes on subscribers, unless they change their strategy, they'll still overbook the lines.
T-mobile's strategy has generally been a higher quality network over a limited footprint. If your within their limited coverage area, coverage tends to be quite good. Wander outside it and it degrades rapidly.
Sprint coverage tends to be better, but their network has generally lagged behind in terms of technology.
I don't think you can really compare the best network in the US (Verizon) to Sprint in any meaningful way. I would put (based on ancedote of course) Sprint's network on par with T-mobile in terms of coverage. I'd rank it far below T-Mobile in terms of speed.
If you need good coverage "everywhere" VZW is unfortunately your only real option. AT&T I guess is a close second.
Or to put it another way. I have lent my VZW phone out to dozens of people to make phone calls when they lacked coverage. I have never once had to borrow a Sprint or AT&T phone to make mine.
Meh. I have T-Mobile, but AT&T's service is faster and has better coverage. I get barely any coverage in my parents house less than 15 miles from DC. Not a big deal for me, because I'm mostly in the city, but its a lower quality product being sold for a lower price. Nothing atypical about that.
+1 on the Tim Wu book. Being a young[ish] person, Wu's perspective on the history of innovation and competition in media and connectivity-provider industries was eye-opening. I think about that book often in regards to the pending mergers right now (Tmo/Sprint, Comcast/TWC, DirectTV/ATT.)
If T-Mobile and Sprint can leverage this to create one more comprehensive LTE network (ignoring the CDMA bits from Sprint), that would greatly benefit T-Mobile customers. T-Mobile's biggest problem is coverage.
I hope this is true as a T-mobile subscriber. T-mobile is great in cities, but it's terrible when you leave. You can make a phone call, but there will no Internet. I just finished a cross country road trip, and if I were ever to do one again, I would get a Verizon phone for a month.
I was a Sprint customer for years. From my experience, their coverage was not a whole lot better than T-Mobile's. I'd also hate to see them switch their networks to be more CDMA centric. CDMA should go away IMO.
With LTE, CDMA is going away. Both Verizon and Sprint have committed to going with world-common standards rather than staying with CDMA, which is dead anyway.
I also just finished a cross country trip and Verizon would not be a bad way to go. I purposely got a Verizon flavored iPad so that I would have multiple networks (AT&T mobile phone) and between the two I usually had coverage. AT&T slipped back to 4G/3G/EDGE and even GPRS (!) much more than Verizon did. But having both was great.
As a Sprint customer, I hope it does go through. My internet speeds are pretty bad even after them upgrading the infrastructure here to LTE. I don't know how it will play out, but I think Sprint users could stand to benefit from T-Mobile. As a T-Mobile user though, I could see why you could be nervous if it went the opposite direction and both services went downhill. I think Sprint wants the band that T-Mobile has that they received in the AT&T fallout so my hopes are positive.
Sprint is already sitting on tons of unused spectrum, and a larger subscriber base than T-Mobile. Nothing stops Sprint from fixing their own service. They just choose not to. And they choose to not fix their network, all across the nation in lots of areas.
My fear is that Sprint's lack of care and lack of effort, will bleed into T-Mobile's network, and we'll be down to just two functional service providers in the US.
T-Mobile has been great for me too, but I'm not totally soured on this idea. Their coverage is bad, and this could help them in the future. They also never get good handset exclusives - if they were a larger company perhaps they might be able to compete better.
I've had both carriers on different devices on a recent car trip across eastern USA and Sprint had much better coverage. Hopefully this would help T-Mobile.
Good news is if this deal doesn't go through, T-Mobile gains to make over a billion dollars to make its network better/faster. * AT&T paid about 4 billion in cash and spectrum when the last merger fell apart..
Can only explain the business reasoning surrounding breakup fees? Why does one company stand to lose more or less than another one if things don't go through? Why is the merger worth more to one than the other?
It is distracting to the target and will require them to do lots more work. For example they will need to provide the materials necessary for due diligence. The fee ensures the acquirer is serious, and that the target is adequately compensated if it doesn't go through.
The acquirer also makes it harder for others to bid because they too need to take into account the fee.
To get some context for what the new Sprint/T-Mobile might do, it's worth watching this fantastic interview of Masayoshi Son, CEO of Softbank (majority owner of Sprint).
He compares American internet to Chinese air pollution, goes on to lambast Comcast, and admit how bad Sprint's network is and how much work there is ahead.
I'm curious of the technical side of things, though.
Sprint is CDMA, Tmobile is GSM. That doesn't mix well, at least compared to a ATT/Tmobile merger. As a current Tmobile user, I'd like to keep the ability to switch out SIM cards, but if Sprint buys out Tmobile and replaces it with their network, that may not be possible.
4G LTE is based on GSM technology so as devices get more and more bandwidth heavy most of the network load will be on GSM derived technology. There are likely infrastructure differences on the switching side between TMobile/Sprint but the RF technology is the same since Sprint is moving away from WiMax based 4G to GSM 4G LTE.
Can a single LTE node/tower/whatever handle handover for both CDMA and GSM? In other words, could a hypothetically-merged company provide the LTE part of the service to both TMobile and Sprint customers using the same equipment?
T-Mobile already does something similar in the US with their MetroPCS network. They've started to open the old MetroPCS network up to T-Mobile users and vice versa by broadcasting multiple MNC (mobile network codes) from the same antennas. If a phone call comes through, it'll hand off to T-Mobile's GSM network or the old MetroPCS CDMA network.
I think Orange and T-Mobile do something similar in the UK with their shared EE network and Verizon with their LTE in Rural America partners in the Great Plains/Maine/etc.
1) CDMA has a standard for something similar to SIM cards that is used in places outside of the US. Verizon never wanted it though, and the phone companies build what the carriers want, not what consumers want.
2) LTE is compatible with both CDMA and GSM, and furthermore specifies a SIM card. All my recent Sprint phones have SIM cards that is used solely for CDMA
3) I expect the Sprint CDMA network is more valuable than the T-Mobile GSM network, but my information is out of date; if T-Mobile has been buying up spectrum faster than Sprint, they may have caught up.
4) T-Mobile actually owns some CDMA spectrum as a legacy from MetroPCS
5) For at least a couple years after the merger, I expect that both 3G networks will continue to operate; it's possible that phones specifically for rural areas (which will get LTE last) with the ability to connect to both will be made; IIRC T-Mobile sells some tri-band phones that connect to bands it owns no spectrum in specifically for allowing that (though it's still GSM, not CDMA).
Think about all the countries without LTE, if you travel to one and want to get a local SIM card (since it's usually cheaper) you're gonna need those GSM bands.
I'd like to believe he's being truthful, but I'm guessing he's just pretending to care, to get public support to get his plans through the FCC and DOJ.
It's just conjecture, but I'm almost certain he won't do anything to improve internet in the US.
I am seriously pessimistic. This merger is about wireless, not wireline.
Yes, Japan has fantastic wireline broadband and Son had a lot to do with breaking open Japan's market (after NTT's lines were made the equivalent of a common carrier). However, Japan also has just 3 mobile carriers and of them, SoftBank is universally panned for the worst reception, lowest LTE speeds, and worst customer service.
There is no reason to believe Son will increase competition in wireless by reducing the US market to 3 carriers.
My (rather large) gut tells me the regulators will say no, and T-Mobile will yet again use the breakup money to invest in more spectrum, and come out on top.
noob question warning, I don't understand how a breakup fee works in america. If the deal can't happen due to regulators, why Softbank should be accountable for that?
There's no legal obligation to set up a breakup fee, and it's not specific to the US; it's a conventional term in potential merge agreements when there might be an expectation of regulatory interference.
The announcement of a merger has major market effects, which tend to improve the standings of one company and not the other; the announcement of that merge failing will have similarly large market effects. The breakup fee is simply a term in the negotiated contracts that specifies what happens if the merge fails to go through; the company whose market standing will fall as a result of the merge failure would negotiate to get paid a breakup fee.
There is no special law or anything covering it that I'm aware of, it's just that T-Mobile says "This will be a distraction, and there is serious risk that it won't happen. If you want us to take that risk, give us some insurance"
Apparently Sprint wants this deal badly enough to risk losing $1B if it doesn't go through, and T-Mobile was canny enough to realize this fact and negotiate for that clause in the contract.
Potential mergers and acquisitions take up a lot of time and resources on both sides -- gathering information, legal fees, meetings, etc. Plus, due diligence is a huge distraction from the normal course of business. The breakup fee protects T-Mobile in case the deal falls through. Smart move.
I am not an expert on this but I do not believe that this merger will pass the Herfindahl–Hirschman Index,test which I think the DOJ takes pretty seriously. That is what I think tripped up ATT when they made the same move.
http://www.justice.gov/atr/public/guidelines/hhi.htmlhttp://en.wikipedia.org/wiki/Herfindahl_index
I have not done the calcs (too lazy) but maybe someone out there has. My guess is it fails on this test.
The article suggests that regulators will feel pressure to accept at least one major merger and reject at least one. Among them, a merger of #3+#4 wireless carriers (Sprint+TMobile) to form a new #3 seems less pernicious than a merger of #1+#2 cable operators (Comcast+TimeWarner) to form a new super-#1. (The ~40mil combined customers is almost 10x bigger than runner-up Cox's ~4.5mil.) My fear is that regulators could find the reverse conclusion by focusing on metrics that don't really reflect the competitiveness in each market.
Horrible psychology to this kind of logic, but it makes sense if you're only thinking in terms of "FCC corporate whoring that can pass the PR smell test", not unlike the "friday news dump".
Aaaand there goes choice again. Seems in the US landline (at&t/Verizon vs Comcast) and wireless data (at&t vs Verizon vs Sprint) will be available on a oligopoly basis only. Very sad to see Deutsche Telekom finally leave the States. They were the only real innovators in that market.
I like what Freedom Pop, Republic Wireless, and Ting are doing. It is likely that if T-Sprintle was as big as Verizon or AT&T they would entirely drop their support of 3rd party providers and screw over the competitive market under their shoes.
You can't take two networks with bad build outs and combine them and get one big great network. Many of the places each is spotty are very similar. Additionally they both use two sep air interfaces which will make integration even more complex. More troubling is that this market needs more competition, not less. To enter the market you need huge swaths of spectrum and having that in the hands of three large competitors vs allowing more competition is unwise for consumers. This deal should be quickly shot down by the FCC/ DOJ. We need more entrants in the space, not less.
Ting has a contract MVNO agreement. Unless Sprint goes out of business entirely, or breaks their contract (very unlikely), nothing will change for Ting at all.
Ting might have to make folks buy new devices (if T-Mobile can succeed in finally shutting off Sprint's legacy 1X and EVDO CDMA stuff), but nothing should happen to Ting that would prevent them from operating.
Would that be good or bad, though? I'm still not sure what to make of it. There's the "viable third competitor" argument, but four is more than three...
More competitors isn't always a good thing. This would solve significant problems for T-Mobile, making them a more viable competitor. I'd love to see T-Mobile become the #1 carrier with corresponding expectations of coverage.
The AT&T/T-Mobile deal made sense when it was attempted, if only in terms of network coverage. This deal only makes sense if Sprint and T-Mobile plan to merge their LTE networks, since CMDA and GSM don't overlap.
Sprint promised LTE service a while back and had a slew of phone with this technology as an option that could be enabled. On the East Coast, Sandy came and destroyed much of the infrastructure we were told, so the LTE technology hasn't really been working as we wish and we told it would. With recent mergers, it may be true that these "small" big companies don't "have the financial resources to compete against...larger players [(Verizon, AT&T)], nor the suite of offerings to attract customers who can get a whole host of services from other rivals. As a result, both sides believe that the only way to remain relevant is to combine."
I have had Sprint for over 10 years and I like Sprint, my service is fine, and the price that I pay is great. I hope this does not change if this deal gets past the antitrust regulators.
Cell phone company mergers should come with a requirement that their entire combined spectrum block go back up for open bid, with some of it set aside for new entrants.
Mergers of companies that control scarce resources have some serious tragedy of the commons problems. There should be a significant cost to doing it.
In theory, the whole point of privatizing the spectrum is to avoid the tragedy of the commons problems. This seems to have been the winning economic consensus in the 1980's and 1990's, which led to the FCC adopting the auction model for spectrum.
There is a significant cost, to the tune of $32B in this case. The spectrum they purchase is far cheaper than this - estimates for the upcoming FCC incentive auction put each winner around $15B for a 10MHz up/down slice. Besides, if you put a spectrum block back up for sale, wouldn't that help AT&T and Verizon control more spectrum since they'd be in the best position to buy the freshly freed spectrum.
In the UK, T-Mobile and Orange merged into Everything Everywere (now just 'EE') 4 years ago.
I can't give an objective statistical answer (or even a first hand subjective answer, as I haven't been a customer of theirs - I left Orange a couple of years before that), but from people who are customers to other random conversations, I've heard lots and lots of people say coverage got better due to the merger, and quite a few say prices got better. Don't think I've heard a single person complain (specifically about the merger - some complain about the company, but that's true of any phone company).
Edit: there's also the formation of Virgin Media, which has been a major force in the UK for 6-7 years now, and is made up of a couple of mergers (NTL + Telewest to form NTL: Telewest, then a few months later a merge with Virgin Mobile). I've no idea if this made it better or cheaper, but certainly I don't remember ever hearing specific complaints against the merger (either when it happened, or afterwards)
T-Mobile was great, but recently I experienced more and more data drops (have full bar of H or LTE, but unable to connect to anything) around the Bay Area. So I do hope they can have some money (either from acquisition or breakup) to improve their network.
You may be working with outdated information. The separate publicly-traded "AT&T Wireless" company disappeared in 2004, and its successor has been wholly-owned by AT&T Inc. since late 2006.
Meanwhile, Verizon Communications has always been the majority shareholder in Verizon Wireless, and sole owner since February.
Whatever separation there may still be between these operations in the corporate structure (e.g. AT&T Inc. vs its subsidiary AT&T Mobility LLC) is only that - corporate structure. It does not ultimately change what each parent company owns / does.
Verizon purchased all of Verizon Wireless from Vodafone this year, for $130 billion. It is now fully owned by Verizon. Vodafone got $59b in cash, $60b in stock, and some other throw-ins.
Also, AT&T Wireless is a wholly owned subsidiary of AT&T, so they weren't exactly far off the mark. The modern AT&T is the net result of BellSouth and SBC merging, then SBC eating AT&T and rebranding itself. The mergers gave them total control over AT&T Wireless. The wireless subsidiary's results flow up to the parent, which shows up in the quarterly results for AT&T, and that is why AT&T is worth $181 billion today. AT&T Wireless is paying for the DirecTV purchase.
"Sprint would pay about $40 a share in cash and stock for T-Mobile, about a 17 percent premium to Wednesday’s price, according to the preliminary agreement."
"The deal is sure to face regulatory scrutiny, and the early terms of the deal would include a breakup fee of more than $1 billion that Sprint would pay T-Mobile if the deal is not consummated."
Sprint has some quasi-GSM technology; they acquired Nextel some years back. Nextel utilized the iDEN protocol. iDEN used a time division multiple access (TDMA) network. TDMA is sort of a precursor to GSM. It's small, but there's some overlap.
If iDEN is any indication, it will take them eight years to merge the networks and by that time your 17-band 6G phone will probably be able to seamlessly bond all the T-Sprint spectrum to provide awesome throughput.
I switched from Sprint to T-Mobile in 2011, and I've been very happy I made the switch. The reception is much better where I live and travel and I get a better selection of phones with GSM (I only got world phones with Sprint, which only gave me 1 or 2 choices). Then T-Mobile got better by offering better plans ($20-30 cheaper per line per month than Sprint), no contracts, more upgrades, and most recently, free worldwide roaming. I tested out the worldwide data in the Dominican Republic this month, and it was very useful as an alternative to WiFi. I used to pay $40 a month extra for Sprint Data Worldwide when they offered it, and I left Sprint the minute they discontinued it. I hope T-Mobile stays independent.
I hope so, too. Whatever the case, I've noticed far better reception with T-Mobile than I've ever had with Sprint (and this is way up in the Sierras, up near Tahoe; good cell reception is pretty much unheard of up here), plus I'm paying $20 less than what I was for Sprint even with the phone payments factored in, so I'm pretty happy with the switch, too.
Haven't tried international roaming (I've never left the continental U.S.), but having that available makes me less nervous about being able to get in touch with someone if I'm abroad.
