Analyst says Sprint and T-Mobile have to merge for both to live

by: Shawn IngramApril 11, 2014

t-mobile sprint

A new report from analyst firm New Street Research says that T-Mobile and Sprint will have to merge lest one of them is forced to fold.

According to the report neither Sprint nor T-Mobile can last for too long, saying that both lack the revenue needed to cover fixed costs. The firm also doubts if either carrier can gain enough new revenue, saying both need to raise an additional $10 billion in the next 18 months to stay competitive. “Both companies aren’t independently viable at the same time,” the report says. “We show that there simply isn’t enough revenue in the industry for four carriers to cover their fixed costs unless there is a significant shift in market share.” Remaining competitive, according to the analyst firm, would include buying more spectrum for both carriers.

New Street Research also makes an argument that in other countries such as Greece, the Netherlands, and Austria, consumer prices dropped when the wireless market consolidated to fewer competing carriers. The argument seems to echo Sprint chairman Masayoshi Son’s comments that Sprint would start a “massive price war” if it was allowed to merge with T-Mobile.

The biggest obstacles to that merger, as New Street points out, and most of us know by now, are the FTC and FCC. Neither government agency wants to see the U.S. carrier market shrink to three carriers. And their arguments make sense. From its current position T-Mobile has been able to shake up the industry with its Un-carrier plans. There is a legitimate fear that a combined Sprint/T-Mobile wouldn’t make the moves the current T-Mobile is making.

Maybe if one carrier was on the verge of failing the government agencies would be more receptive to the idea of a merger, but by then it may be too late. New Street says that at that point the merged carrier wouldn’t be able to challenge the AT&T and Verizon duopoly.

The New Street report is fairly depressing in that it makes a fairly reasonable argument for a Sprint/T-Mobile merger. It’s hard to see that merger being great for us as users. Sure, there’s promises of a “massive price war,” and the examples from other countries hint that maybe it would be a good thing, but there’s always a risk that promises won’t be kept and that the U.S. will prove the exception to the rule.

For now we’ll just have to hope that at least one of them can pull in the revenue needed to live and compete against AT&T and Verizon. The question is, which one would you like to see survive if one of them has to fail?

  • Roy

    T-Mobile has more potential to grow sprint as always lacked reliable service

  • Fluffy34

    Honestly I almost feel like Sprint is the only service provider with actual unlimited data. I need that bad.

    • Roseman Eisen

      I have unlimited data on T-Mobile with no slow down.

    • VersedNJ

      Unlimited at 500kps don’t mean squat.

      • illregal

        It’s slightly better then 500kbps where I’m at. And I’ll often go through more then 8gb in an evening.

  • mhecky

    T-Mobile is truly unlimited. What’s the point of being unlimited on Sprint’s network?

  • Roseman Eisen

    It’ll be a disaster if Sprint gets T-Mobile at least T-Mobile doesn’t suck and is shaking things up

  • Goblin Shark

    I don’t want to see either go down, I’d rather see them merge. I’m a Sprint customer

    • Paul Murray

      If they merge, I’d rather see the T-Mobile model be continued. Sprint has been flailing along like a fish out of water. It never gets anything right.

      • Goblin Shark

        I agree, just to get the GSM phones if for no other reason.

        • Paul Murray

          I’ve had Sprint and Verizon (CDMA) and AT&T and T-Mobile (GSM), hands down the call quality on GSM is a lot better. When Verizon first got the iPhone, I was on AT&T. I had someone helping with an insurance claim, he dialed the call on his Verizon iPhone, over the speaker phone. I kept wondering why the call was so crappy. Then I saw the banner on the top of the screen “Verizon” and it all made sense.
          I’ve always thought GSM sounded as clear as a land line.

    • Loyd Smith

      some one must have brian washed you. i have waited over 4 year’s, still hasn’t fixed the tower not 5 blocks away sprint said the would send a tech to see what is wrong . my response was when i lived less than block away you said the same F…… response . also i lost 4g not a half mile from home and at least 4 to 5 times all over Houston. i never loses 4g on t mobile even in the other town’s outside off Houston , Tx. i could go longer but my finger is tired which one? also t mobile wifi calling saves on battery

      • Goblin Shark

        I didn’t say anything about towers.

  • On a Clear Day

    I hope that the FTC and FCC do not cave into the fear mongers and allow a merger – even though it would I am sure make both Verizon and AT&T’s day by eliminating the only real thorn in their sides – T-Mobile and Jon Legere in one fell swoop – so they could get back to doing business the old fashion way, their ways.

    For the first time in ever the U. S. cell phone market has seen a truly dynamic approach injected into the staid, everyone is the exactly the same (with contract) paradigm – and the old guard definitely doesn’t like it. Shall we throw a pity party – or rejoice that someone is offering us a choice that frees us from the albeit extremely well crafted boardroom machinations of companies whose profit margins depend on our being willing to quietly, without fighting surrender unto and render unto them that which is Caesars – I mean theirs? I will join you in the latter – never the former! lol

    Is there anyone out there, with a brain in their head who doesn’t own stock in Verizon or AT&T or Sprint, who likes the idea of a contract? Anyone who has examined the pricing costs and structures – the hidden ones – not the advertised “our lowest prices ever” inducements to sign up for two year ones, who can seriously say they are actually getting a good deal?

    We have come a long, long way baby since the the days when our captains of industry actually demonstrated that they were born with a Y chromosome with the attendant physical manifestation ascribed thereto. Today, what we have leading our corporations and our country are politically correct, play it safe creatures of conformity, who would sink like stones if thrown into the real world pool of entrepreneurial, dynamic endeavor; they are caretakers who think all the battles that needed winning are won and now is the time to make the world safe for mediocrity – and them.

    The worst possible thing that could happen would be the merger of T-Mobile with Sprint – let Sprint die a deserved death if it deserves death and then let T-Mobile buy them out when it becomes clear to the FCC and the FTC that it will be the way they can save their political rear ends by not causing all of Sprint’s employees to become unemployed. At that point, there will not be any bothering worrying about whether they approve or not – and they certainly wouldn’t let AT&T or Verizon buy them because that would do exactly what they supposedly are against doing now – make the two that would be King companies – too powerful.

    Right now we are at a critical stage – and not just in the cell phone world – but in the entire world when it comes to attitudes – about accomplishment, about individuality and free thinking – there has never been a greater assault of the mediocre thinkers upon those who threaten the stable sameness of their boardroom and ivory tower mentalities.

    The only company in the news that is demonstrating that it, its leader and its employees (both male and female) have – metaphorically speaking – a Y chromosome in their characters is T-Mobile and Jon Legere – long may they reign as they continue on their road to reaping the rewards of not being afraid to stand up and be counted and being a harbinger of good things to come! SMS

  • polo815

    Sprint suck real bad I’ve been with sprint 4 years and I’m sorry but I had to let them go now I’m with t mobile and be90eve me when I say they are a lot better then sprint I have unlimited everything on my note 3 and my lg g2 sprint just need to give it up they are taking people for there money and I say that because sprint do not have LTE 4G in Philadelphia that’s sad and it’s more places That don’t have it a lot more let’s put it like that they tell you they do have 4G in Philadelphia when you are in their store so you can buy their two years contract Then after you find out that they don’t have 4G and you call them to tell them why in your store you are advertising 4G saying you have something you don’t they tell you we have people right now working on putting up are 4G just give us 90 days it will be up lies Two years later guess what nothing at this point One of them is going down and believe me it’s not going to be t mobile.

    • Loyd Smith

      yes yes

  • endy

    Wish Sprint would die off. Data is a commodity and TMo knows that all people care about (or will) is coverage, price and cust service. So they play the price game extremely well. Can’t believe crap Verizon and crap ATT still gouge their customers with such high prices. Then again I can’t believe there are so many idiot citizens who willingly buy their overpriced services. And many of these a-holes also buy overpriced APPLE products. Guess the US is still too rich and needs to be knocked down a few levels. Maybe an economic collapse would cause those folks to be a bit more cost-conscious.

    • Kurtis Duberton

      I agree with you 100%. I was with Verizon and their price is frigging ridiculous. I switched to TMo in a heartbeat when my contract expired. Now I pay half as much and get twice the data. I guess the majority of the people just aren’t aware that they are being overcharged by att and verizon.(And Apple of course).

  • Emanuel Berrios

    T mobile

  • The so called anal(ysts) are nothing more than lobbyists. Why does one have to be swallow by another is beyond me. If spectrum is the issue here, why can’t they simply form an alliance (like EE in UK) and share the spectrum and the towers? Create a joint venture that will be owned by both, will maintain the towers, and the spectrum and everything will be just fine. But I guess Sprint is afraid of the competition so they’re pushing to swallow Tmob. Back off you piss colored carrier.

  • ichuck7

    Sprint is incompetent. Last in 4g coverage, last in 4g speed. And their prices are just as high as anyone else’s. T-Mobile is doing a lot of things right.

  • On a Clear Day

    Shawn. You put together a good article that logically lead us through the information it pertains to, there was however, one glaring omission that left it wanting.

    Namely, you did not draw upon your – hopefully by the time you finished researching it – far greater than you had space available to convey – body of knowledge and render for us an opinion, but rather through the ball into our courts with a “Well what do you think?” ending.

    Don’t feel badly though – most writers regardless of the venues and/or topics that they word smith about tend to avoid – like politicians – expressing any definite opinion that they can then be faulted about.

    It is called in political circles making sure you have plausible deniability. Now I realize that was probably the farthest thing from your mind as well as that of your editors when you wrote – but a rose is a rose by any other name – and a lack of opinion voiced means either a lack of conviction felt or a fear of standing out.

    Trust me, I and anyone else out there who is interested in seriously reading and considering what you wrote will not fault you if your opinion is wrong (and doesn’t agree with mine) but, if you don’t even share it, how are we to be able to be aided and take advantage of the insights you naturally had to have as a thinking man? Which I know you must be. Otherwise, you would not be working with “the boys” at Android Authority – such a circumspect and prescient lot are they!

    The people who get remembered – and followed – in this world are the ones – like Jon Legere of T-Mobile and as mentioned in my little missive below, who are not afraid to stand up to forces the faint of heart would run away from; not afraid to call it as it really is and call a spade a spade. This is also why they draw the most virulent of criticism from entrenched forces that find themselves discomfited when unpleasant truths they wish to not mention raise their hoary heads and roar.

    It is because they do tell it like it really is – and let the chips fall where they may – that people remember, like and truly respect them – even if they don’t necessarily agree with them.

    There is an old truism – and then it will be “and so to bed” time for me – that was best put I think by a story related by a battle hardened politician about whom a scathing article – obviously politically motivated he said I am sure – was written.

    A reporter said to him – “Doesn’t it upset you that they said those terrible thing about you?” The politician looked the reporter in the eye and smiled, and paused, and then said.

    “What you have to understand is that most people don’t remember most of what they read and hear, much less the particulars or the context of what was said related related to when they heard your name, but they do tend to remember the name. And in the end, as a politician, what I want most is for them to remember my name – as opposed to the new fella just starting out with no name recognition. I can always reframe and explain away any negative context – if they should even recall; but if they don’t even know me from Adam – well, then I am always starting from scratch. People like to go with the familiar, the trusted and one step toward becoming familiar and trusted is for them to know your name. So, without realizing it, that reporter – much to their dismay if they ever thought about it – actually helped me towards winning my next election!”

    • Goblin Shark

      Do you even read these articles? They all end with “what do you think?” They want you to try using that space between your ears.

    • Loyd Smith

      are you really not a writer ? truth is truth

  • Nolan

    How would a T-Mobile and Sprint merger even work? They both use completely incompatible spectrums.