Kagan: Can T-Mobile, Sprint merger be saved?

Last week I gave an interview to Bloomberg about my thoughts on the trouble the T-Mobile, Sprint merger is suddenly having. Plus, we are learning that Sprint is in much worse condition than they originally told us. What that says to me is this: T-Mobile and Sprint apparently both need this merger. They won’t walk away. So, what can they do to win approval?

Let me share with you some of what I told Bloomberg. The signal we are getting from regulators is this… this merger, as currently positioned, will not likely be approved. That’s bad news for the two companies. But why are regulators taking this position?

Why regulators are against the T-Mobile, Sprint merger

As I have been saying for years, whether this deal is ultimately approved or denied depends on whether regulators are looking forward or backward.

If they are looking forward to the changing wireless industry with 5G, then this merger makes sense. However, if they are looking backwards, they will see no urgency for this deal to be done.

Apparently, regulators are signaling that they are looking backwards. I think this is a mistake since the wireless industry continues to change going forward. What worked yesterday may not work tomorrow.

Why T-Mobile and Sprint merger is not dead

What that means is quite simple. The deal is not dead. Not yet anyway. Think about what regulators have said. This merger, as currently positioned, will not likely be approved.

What that says to me is both T-Mobile and Sprint need to change their strategy. They need to give regulators exactly what they want in order to approve the deal.

That’s the new challenge. To determine the exact recipe for the secret sauce. That’s what they must now pursue.

If they can, they may be able to save this deal. If not, well then, the deal doesn’t look like it will be done.

That would be unfortunate for both companies. T-Mobile is a great marketer, with little spectrum. Sprint has plenty of spectrum but is no longer a great marketer. Together they make a strong third place competitor. Separate, they remain a weak number three and four.

Anyway we look at this deal, the wireless industry is on a path of transformation from 4G to 5G. This will continue. AT&T Mobility and Verizon Wireless have the strength to continue to grow. T-Mobile and Sprint do not if they remain separate.

The industry will continue to change with or without a merger. With a merger, we will drop from two strong and two weak competitors, to three strong ones. That is good as the industry shifts to 5G.

Without a merger, the marketplace will keep two strong and two weaker competitors. AT&T and Verizon are very strong industry players and T-Mobile and Sprint struggle with 5G.

T-Mobile, Sprint are much weaker competitors than they originally stated

T-Mobile and Sprint are not as strong as they like to talk about in their marketing and messaging. And as a matter of fact, testimony from both earlier in this process showed they are actually weak with regards to 5G.

And now with this news that Sprint is even weaker than previously suggested, things don’t look so good.

What that means is even if the merger is denied, I see the die being cast that something will have to happen to these companies. Things will not likely remain the way they currently are.

Options if T-Mobile, Sprint merger is denied

One option is they may be acquired by the cable television companies with their wireless operations. Currently, Comcast Xfinity Mobile and Charter Spectrum Mobile are resellers of Verizon Wireless. When Altice Mobile enters wireless in a few months, they will resell Sprint.

So, there is a potential for this kind of acquisition.

Another option is with Google Project Fi or Google Fi as it is now called. It could also be in the market for a wireless network. They currently resell T-Mobile, Sprint and US Cellular.

Today, I believe the situation is becoming critical. As it is starting to look right now, I think Sprint would have been better off not being acquired by Masayoshi Son, Chairman of Softbank from Japan.

Sprint would have been better off continuing to be run by Dan Hesse, who was in the process of rebuilding the company after a disastrous decade under other management. But that’s water under the bridge now.

Neither T-Mobile or Sprint can afford to walk away from this merger

Bottom line is this. I don’t believe T-Mobile or Sprint will back away from their attempt to complete this merger. So far it seems to be one of the longest merger stories ever written. And it’s not done yet.

Since they both need this deal, I firmly believe they will ride this horse for as long as they have to until the deal is either done, or there is no hope in sight.

I have said in the past and I will say again today, looking ahead at the changing 5G marketplace, I see no other choice. T-Mobile and Sprint need to merger for their own sake. It’s also important to understand that this industry will be fine with or without this merger.

One way or another, something will happen with T-Mobile and Sprint going forward. The writing is on the wall. Either they merge, or other companies may look at acquiring them. Wireless is key to growth for every company going forward.

So, let’s keep our eyes open. Whether or not they are approved to merge, the story will not be over. Just this one chapter. Stay tuned.

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