Mergers are a controversial topic in the carrier industry. This is not specific to the United States, as it happens all over the globe as well. As 4G LTE adoption in most markets is nearly complete and as companies are gearing up for the launch of 5G over the next five years, mergers were almost inevitable as a way consolidate efforts – but many mergers failed (and will fail) to get approval. Readers will remember the failed AT&T merger with T-Mobile in the US. In India, a merger between two carriers fell apart in September. In the US, however, there were reports in September that a T-Mobile merger with Sprint was back on the table.
The merger would see a combined entity under the control of Deutsche Telecom, the owner of T-Mobile, and it would have reduced the total number of wireless operators in the US. However, last week several sources reported that the T-Mobile and Sprint merger had been dropped, on account of lack of agreement between the two parties over several issues.
The issues in contention were related to the fact that, according to sources, Softbank could not agree to give control of Sprint to Deutsche Telecom as the company’s founder was afraid to give up too much control over the carrier. Not only that, it seems that the two firms also struggled to come to an agreement on the valuation of Sprint’s shares, as Sprint has been losing money for several years.
Now, T-Mobile has officially confirmed that the company is ceasing talks of a merger with Sprint, “as the companies were unable to find mutually agreeable terms.” T-Mobile President and CEO John Legere noted that the prospect of combining T-Mobile with Sprint had been compelling for a variety of reasons, including the potential to create significant benefits for consumers and value for shareholders.
He went on to state that the company had been clear that a deal with anyone would have to result in superior long-term value for T-Mobile’s shareholders as compared to the company’s stand-alone performance and track record.
For now, consumers can breathe a sigh of relief as talks of a merger have dropped. Dropping the number of competitors in the wireless industry is typically not a good idea — it may set up an oligopoly and this, in turn, has an adverse impact on customer satisfaction. Both companies will have to look for other ways to maximize shareholder value; focusing on bringing more value to consumers would be a good way to start.