Chart: Here’s why Sprint wants to buy T-Mobile, and why the feds are skeptical

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The wireless industry is abuzz over a potential merger between T-Mobile and Sprint, but it’s not clear yet if U.S. regulators would be willing to let a deal go through. This chart, which Quartz reports is from a Goldman Sachs report on mergers and acquisitions, shows exactly why Sprint wants to merge with T-Mobile, and why regulators might not be so accommodating of such a deal.

The way Sprint Chairman Masayoshi Son reportedly sees it, a merger between the two companies would create a competitive playing field where Sprint and T-Mobile could finally compete on an equal level with Verizon and AT&T, which control the lion’s share of the profits in the wireless industry. But on the flip side, the Justice Department and the FCC have said that they’re happy with the number of players in the wireless market, and don’t really want to see it shrink from four to three major carriers.

John Legere

John Legere

Compared to where the industry was in 2003, three of the major carriers on that chart have been gobbled up in mergers and acquisitions. But while Verizon and AT&T control more than two-thirds of the market, Goldman analysts said that pricing pressure and innovation from Sprint and T-Mobile have kept prices low.

“It is arguable that the industry has in fact become more competitive for the industry’s top two companies, as #3 and #4 players Sprint and T-Mobile have strengthened their competing nationwide networks with ongoing buildouts and spectrum acquisitions (i.e., T-Mobile’s acquisition of MetroPCS and Sprint’s acquisition of Clearwire),” Goldman analysts said. “This has enabled them to be more competitive vs. Verizon and AT&T in key urban markets than previously, a dynamic that could continue to keep a lid on industry margins near term despite a very high level of consolidation.”

That’s ultimately the issue at hand: regulators are worried that a merger would lead T-Mobile and Sprint to step back from trying to gain subscribers through aggressive innovation. While an oligopoly is good for boosting financials, it’s not necessarily good for consumers. Especially with the success T-Mobile has seen with its “Uncarrier” moves, it seems like a four-player wireless market may be what’s in the cards, at least for a while longer.

In a conference call with analysts this week, Sprint CEO Dan Hesse not surprisingly said that further consolidation in the wireless industry would be a good thing.

“I believe that further consolidation in the U.S. wireless industry outside of the big two, AT&T and Verizon because they’re so large, would be healthy for the competitive dynamic of the industry, would be better for the country and better for consumers,” Hesse said.

  • analyzethis

    The Feds allowed AT&T & Verizon to merge themselves into a duopoly. They didn’t allow AT&T to merge themselves into a 30 million customer advantage over Verizon.

    Now it’s about protecting AT&T & Verizon. Neither T-Mobile nor Sprint has the juice on their own to overtake them.

    If Verizon and AT&T really dropped prices for 2-3 years they would squash both Sprint & T-Mobile into bankruptcy and neither of the small fry could update their networks or compete in the 600 auction. The end game.

    • Glen Barrett

      Bush was one helluva president. Remember, AT&T and Cingular (Texas-based SBC and BellSouth) were not supposed to merge. But then suddenly, the FCC Chairman resigned or quit. When Bush appointed Michael Powell, suddenly, there was “No problem.”

      Today, the “new” texas-based at&t (former SBC HQ) is where the 2-story gold statue resides. It was moved from AT&T’s former offices. It was New York City’s second-largest sculpture, after the Statue of Liberty.

      In the past, AT&T would place the statue outside, so everyone could enjoy it. But at the “new” AT&T you need an appointment.

  • Holly

    Not only would the merger create more competition in the long run, it would make Sprint an international player. Right now their network lacks international mobility, something that T-mobile is great at. Other companies sell Sim cards that use T-mobile network for international travel. For me, as a Sprint customer, it would be a win win. Otherwise, I’ll be switching soon to a carrier who can support my increasing international travel. If I’m Son, I keep pushing for this deal.

    • Arsh

      Sprint’s service is a dinosaur and they’ve lost a ton of customers, myself included because of it.

  • Arsh

    Blocking the Merger is good for consumers because Sprint’s service sucks and people are jumping ship to T-mobile left and right. I’ve had 4 friends already ditch major carriers, ATT, Verizon, and Sprint for T-mobile already. Letting Sprint grab T-mobile just ruins everything gained and helps Verizon and ATT. The best one can hope for is that T-mobile grabs US Cellular and with their low costs and sudden rural coverage starts ripping Verizon and ATT down.

  • Taylor Long

    The merger should not be allowed because Sprint is awful. Not only does the 4G NOT work (http://mysprintexpierence.blogspot.com/2013/12/blog-introduction-4g-lte-speed-and.html ). The basic phone and texting services do not work…all over the country. Here is an article about how local reports in 14 different states have done stories about service problems http://mysprintexpierence.blogspot.com/2014/02/news-articles-detailing-sprints-bad.html . Furthermore, Sprint still uses its 1X network. Yes, 1X. Here is proof. http://mysprintexpierence.blogspot.com/2014/01/proof-that-sprint-covers-up-its-1x.html .

    • Rich

      Google buys t-Mobile for the Win, is what needs to happen.