- Wireless phone companies Sprint and T-Mobile announced plans to combine
- The merger would create a new telecom giant, second to Verizon
- Regulators must examine whether the combined company would create a monopoly
Two of the largest mobile carriers in the U.S. are planning to team up in a merger worth $27 billion, in a move that could reshape the telecom industry.
T-Mobile and Sprint, the nation’s third and fourth-largest mobile providers respectively, hope to create a new telecom giant, with a reported 100 million subscribers and plans to build a state-of-the art network for consumers, according to a T-Mobile press release.
The newly combined company would instantly become the second-largest mobile carrier, after Verizon, which has a reported 116 million customers. AT&T has 93 million customers, according to reports.
The merged company, which will be called T-Mobile according to a company press release, is likely to be a strong competitor as the Federal Communication Commission (FCC) gets ready to auction off airwaves for an upgraded 5G network in the fall, experts say. Such networks are expected to be up to 100 times faster for consumers.
Sprint is owned by the Japanese conglomerate SoftBank. T-Mobile is owned by German telecom company Deutsche Telekom.
Would it be a monopoly?
Big mergers like this have sparked monopoly concerns in the past.
The newly combined company would instantly become the second-largest mobile carrier, after Verizon
Sprint and T-Mobile had floated a merger in 2014. Those plans, however, were thwarted by regulators who feared the combined company could create a monopoly. Similarly, in 2011, AT&T similarly attempted to merge with T-Mobile, a move that was also blocked by regulators.
A merger between T-Mobile and Sprint, if approved by regulators, would leave the the U.S. telecom market with just three big players, sparking fears of a monopoly. A monopoly, generally speaking, is when one company has a lockdown on a market and can control pricing for its products and services without fear of competition.
The merger between Sprint and T-Mobile must be approved by the Federal Trade Commission and the Department of Justice.
Read more about monopolies.
Why are so many companies merging these days?
Mergers and acquisitions–when one company purchases another for a market advantage–are happening in numerous industries.
Companies acquire or merge with other companies to make themselves stronger market competitors. They will often merge with companies that have something they need–such as a product or service, or even customers.
Big drug-makers, for example, have been acquiring biotech companies that have developed promising treatments for cancer and other diseases. Similarly, healthcare companies and prominent retailers and drug store chains, have announced plans to merge in recent months.
Could this merger affect my cell phone bill?
Possibly. One of the chief fears about the merger, experts say, is that the combined companies may jettison their previous commitment to being a lower cost provider for cost-conscious consumers, according to reports.
“The biggest problem with this merger is that these two companies are each other’s biggest competitors for serving middle-income, budget-constrained wireless customers,” Gene Kimmelman, a former senior antitrust official at the DOJ told the New York Times.