Sprint and T-Mobile announced today that they will merge, pending regulatory approval.
Mergers rarely benefit consumers. Just take a look at the airline industry, where the loss of airlines like AirTran, Continental, Northwest, and USAirways over the past decade have meant that the remaining carriers can drive up prices and cut benefits without consequences.
I’d expect the same thing to happen with a merger between T-Mobile and Sprint. Currently those carriers are a distant 3rd and 4th place to Verizon and AT&T and they price their services to be able to compete with the big guys. They have forced Verizon and AT&T to lower their prices and bring back unlimited data offerings. For that reason alone I hope that the government challenges the merger.
T-Mobile and Sprint will argue that they need to merge to compete with Verizon and AT&T. I think that it’s far more likely that when there are just a big 3, they will collude to keep pricing high. That’s not unlike what the airlines have done with basic economy and the elimination of awarding miles based on flight distance.
T-Mobile and Sprint will also claim that they won’t cut jobs and that they’ll keep 2 headquarters in Washington and Kansas. That’s like when Jeff Smisek promised the Attorney General of Ohio that United wouldn’t dehub Cleveland in a merger with Continental if he didn’t oppose the merger and I wrote back then that I didn’t believe that would happen. United did indeed close their Cleveland hub and I’m sure that Sprint’s Overland Park headquarters would suffer the same fate. The new company will be run by T-Mobile, will be called T-Mobile, and will use their headquarters.
There is good news here for Sprint customers if regulators kill the deal. In lieu of a typical breakup fee, T-Mobile has agreed that if the deal is rejected they will give Sprint customers the ability to freely roam on the T-Mobile network when there is no Sprint coverage.
If the deal is approved, the merged company will become nearly as big as AT&T. I’d expect that people with grandfathered Sprint plans will eventually be forced off of those plans and that prices will climb significantly. Other perks that Sprint and T-Mobile customers enjoy now due to the underdog status that those companies have would likely be cut as well.
I’m definitely a beneficiary of the low-cost competition as I locked in Verizon’s intro unlimited offer for $30/line/month family plan for unlimited calls, data, and texting. With fewer competitors Verizon can always decide to kill that grandfathered intro plan.
I was a Sprint user for a solid decade from 2001-2011. I started off with a plan that was $39.99/month and included 350 anytime minutes and 2,150 night and weekends minutes. I signed up for a 3 month trial of free WAP internet that allowed for 3 lines of text only internet on my phone. As far as I know I was the only person in my yeshiva at the time that had a cell phone and I became the source of information for my fellow students and teachers some 2 weeks into the school year on 9/11, the day that will forever live in infamy.
I loved learning various systems in my free time and during my yeshiva years in YOEC in LA from 2001-2003 I racked up millions of airline miles and also delved into the cell phone system when I wasn’t studying. Soon enough I was getting a new Sprint smartphone every month and was running an 18 line business account while renting out cell phones to my fellow yeshiva students. It was all rather lucrative. My Rov used to call me the Sprinter Rebbe.
In 2011 Sprint figured out that selling me 18 lines of service for about $300/month wasn’t all that profitable and they gave me 30 days warning that I had to find another service provider.
I jumped ship to Verizon and the difference was night and day. I no longer dropped calls. My phone worked in the basement and in places it had never worked before. Data was much faster. The monthly billing mistakes went away. I was thrilled to have switched.
It reminded me of earlier that year when Mimi and I were in Tasmania looking at baby penguins returning from the ocean in middle of the night. The guide asked that anyone with Telstra please silent their phones and anyone with any other carrier not to worry about it as there was no way they would have service anyway.
Verizon has gone back and forth with their unlimited plan strategy and I hope it sticks around when they roll out their 5G network.
My point is that if you have Sprint or T-Mobile, you should be rooting against this merger so that you don’t lose benefits as prices rise. If you have AT&T, T-Mobile, or an MVNO it will still affect you. The more competitors that exist, the better the odds that your carrier will feel the need to compete for your business.
What are your thoughts on the merger?