Competitive Implications if T-Mobile Sprint Merger is Denied or Approved

The final resolution of the T-Mobile US merger with Sprint remains unclear. But there are some competitive implications no matter the matter is resolved. If the merger is approved, new T-Mobile is likely to be less aggressive about pricing, no matter what it claims will be the case. 

Though smaller than Verizon in terms of subscriber accounts, new T-Mobile would be very close to AT&T, with each of those two carriers having about 29 percent market share. “If the deal is permitted, we would expect T-Mobile to largely focus on the integration and Ibuilding out Sprint's 2.5-GHz spectrum, and we believe that a wireless market with three nationwide carriers would lessen competitive intensity in the near term,” says S&P Global. 

S&P Global Ratings

S&P Global Ratings

“If the deal is rejected, we would expect T-Mobile to resume its aggressive behavior with lower pricing and more "uncarrier" initiatives,” S&P Global says. 

New T-Mobile might be a bigger direct competitor to U.S. cable TV companies, as T-Mobile has promised an aggressive fixed wireless assault if the merger is approved. If the merger is not approved, both T-Mobile US and Sprint become more immediate acquisition targets for cable interests.

It always has seemed clear that a three-provider U.S. mobile market would be more sustainable than a four-provider market, because it arguably ensures higher industry profits. 

Also, it can be argued, a sustainable thee-provider market provides the possibility of more competition that a two-provider market will not. 

And many argue that a robust four-provider market is unlikely to be sustainable, because competition depresses earnings and profitability, making continual investments in networks and services more difficult. 

The other issue is that new competitors, including cable operators Comcast and Charter Communications, plus low earth orbit satellite constellations, plus Dish Network, are coming. 

If one assumes the long-term sustainable pattern in the U.S. market requires facilities-based competition across mobile and fixed domains, then even a merged new T-Mobile will eventually require another combination with a fixed network operator. That is doubly true if the T-Mobile merger with Sprint is blocked.