Telecom giant T-Mobile has inched one step closer to sealing its $26 billion deal with Sprint. They just won approval from two national security reviews. If this merger is consummated they would have more than 127 million customers. It would leave the U.S. wireless market dominated by three national players instead of four, and perhaps leave black consumers behind in the wireless carrier race.
The Breakdown You Need to Know
You might need to start paying close attention to your wireless bill if this deal closes. Consumer advocates have warned the combined company would raise fees for pre-paid and other low-cost mobile phone plans, which Sprint and T-Mobile have previously been driving down. Earlier this year, CultureBanx reported the median household income for African Americans was just over $39,000 in 2016, putting black people directly in T-Mobile’s sweet spot among customers who make less than $75,000 per year . Sprint’s pre-paid brand Boost counts 83% of its users in that income range, according to data from Kagan, S&P Global Market Intelligence data.
Team Telecom which consists of the Committee on Foreign Investment in the U.S., the Justice Department, Department of Homeland Security, and Defense Department provided their consent to the deal. What helped to spur this approval was that SoftBank which owns most of Sprint, and Deutsche Telekom the majority shareholder of T-Mobile agreed to stop using Huawei equipment, according to Reuters. The publication noted several governments around the world have distanced themselves from Huawei citing concerns its gear could help with Chinese spying.
Pre-Paid Phones Mindfulness
The real issue with these two companies coming together is that T-Mobile and Sprint sell their airwaves to smaller wireless carriers, which primarily operate in the pre-paid space and also serve low-income customers. Currently T-Mobile has 38% of the U.S. pre-paid market, while Sprint has 16%, according to S&P. If you look at the breakdown by race 15% of Sprint users and 14% of T-Mobile users are black, according to Nielsen’s Digital Media Vice President Jerry Rocha. Low cost options are unlikely to remain with the market dominance this deal would bring about, though customers could see coverage and data speeds improve.
T-Mobile plans to persuade regulators to approve its pending merger with Sprint by leveraging smaller carriers that use its network. They want these smaller carriers known as mobile virtual network operators to help get the deal done, by issuing public statements or even write newspaper editorials, to help convince antitrust regulators this acquisition is a good idea.
The company expects the deal to close in the first half of 2019. Of course they still need to win antitrust approval from the Justice Department and the FCC.
Date: December 27, 2018