Sprint-T-Mobile Merger: Channel Braces for Impact

**Editor’s Note: Please click here for a recap of the biggest channel-impacting merger and acquisition news from March.**

After years of on-again, off-again talks, Sprint and T-Mobile agreed over the weekend to merge in a $26 billion deal that, if approved, would reduce the number of major U.S. wireless carriers from four to three.

“The combined company will have lower costs, greater economies of scale, and the resources to provide U.S. consumers and businesses with lower prices, better quality, unmatched value and greater competition,” T-Mobile said in a news release.

The newly combined company will operate under the T-Mobile brand, the companies said. It will be led by John Legere, current president and CEO of T-Mobile US, who will serve as chief operating officer. The company’s board will include the chairs of the existing boards as well as Marcelo Claure, Sprint’s CEO.

“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience — and do it all so much faster than either company could on its own,” said Legere. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”

We’ve seen similar merger attempts fail in recent years, most notably AT&T’s attempt to buy T-Mobile in 2011. The former gave up the ghost when it became apparent that regulators would reject the deal. That, however, was a proposed tie-up between the largest and fourth-largest wireless companies. Sprint and T-Mobile coming together would represent the third- and fourth-largest.

Groups concerned about the agreement already are out in force encouraging regulators to turn their backs – or at least take a long look at – the proposed merger.

Michael Finneran

“The U.S., unlike Europe, is typified by a small number of carriers, controlling a rather large population, which leads to relatively high plan rates and comparatively higher extra service (VAS) subscription rates,” noted Gil Regev, chief communications officer at RGK Mobile, the mobile content and payment aggregator. “A merger between two of them will most likely not benefit the end user; hence regulators’ fierce objections to the deal. With the recent lift of net neutrality, the mobile carriers hold quite a bit of power as it is; I can imagine that such a deal will be met by resistance of the state-level regulators if passes the federal level.”

Channel Partners contributor Michael Finneran, of dBrn Associates, takes the opposite point of view.

“This combination will be a lifeline for T-Mobile and Sprint and finally give them the weight to compete effectively against AT&T and Verizon,” Finneran told us. “Some are saying it will be a blow to the consumer, but I don’t see the little guys abandoning their shared aggressiveness. The majors liked having underfunded competitors as the market moves to 5G, and a combination is the only way T-Mobile and Sprint could effectively compete. Let’s hope the Trump …

… Justice Department sees it the same way.”

Peter Rysavy, wireless analyst with Rysavy Research, sees the potential merger as beneficial, but challenging.

“A merger of Sprint T-Mobile will provide deeper financial resources and a greater pool of spectrum, which could facilitate 5G deployment, but this will come with the cost of merging two complex networks,” Rysavy told Channel Partners.

The proposed merger’s impact on the channel isn’t immediately clear. T-Mobile teased a new channel program at the Channel Partners Conference & Expo in 2014, following that up with a full-blown announcement in July of that year, touting how it would “unleash the benefits of the Un-carrier revolution to U.S. business customers through the partner channel community.”  While still inviting resellers to offers its connected mobility solutions, the company has been largely quiet on the indirect front since.

Sprint, on the other hand, is showing some life. The company had its largest presence in years at this month’s Channel Partners show, introducing Smart UC, its as-a-service voice and UC productiivity suite that’s powered by BroadSoft. The product’s goal is to increase productivity, mobilize a workforce, reduce IT operational costs, streamline processes and more.

Earlier in the year, Sprint struck a deal to use Cox’s broadband infrastructure to improve its backhaul and small-cell deployment opportunities. Sprint told us at the time that the deal will allow it to piggyback on Cox’s existing infrastructure to densify its network — a move that could make the wireless company more attractive to partners.

The companies’ giant commercial rivals, wireless and networking behemoths AT&T and Verizon, have been huge players in indirect sales for years, running some of the channel’s largest partner programs.