With the pending mega-merger, a new wireless carrier will emerge on the market and set the stage for cable’s transformation
Reports indicate the long-awaited $26 billion merger of T-Mobile and Sprint is finally closing. The deal will reshape the U.S. wireless market by catapulting the new T-Mobile to second place in market share behind Verizon and creating a new, fourth-place carrier far behind AT&T. The question that remains: Will the deal become a catalyst for transforming the cable segment?
The Lowdown: Over the weekend, reports started circulating that T-Mobile’s parent company, Deutsche Telekom, conceded to terms on divesting assets, including Sprint’s Boost division, and access to the company’s network to create a fourth carrier. Federal regulators were threatening to sue to block the deal if T-Mobile wouldn’t concede enough assets to create a viable carrier to maintain competition in the market. The leading candidate to become that new company is Dish Networks, but Altice and Comcast have also been mentioned in reports.
The Details: The concern that held up the deal for more than 18 months is just how strong or flexible to make the new carrier. T-Mobile wanted certain controls to protect it against a larger third-party buying into the new company and using the access to its network to undercut its viability. T-Mobile’s concerns were that a company with deep pockets, such as Google, Comcast, Facebook, or Amazon, would swoop in, infuse the new company with cash, and use the low-cost access to its network to undercut its newly acquired market share and growth potential.
The Impact: The cable industry is looking for new market opportunities as more residential customers are cutting the cord on their traditional services and content costs increase. Many carriers already provide metropolitan Wi-Fi as a means of enhancing the value of their services. Industry observers have long speculated that cable companies would need to move beyond their last-mile data and voice services and jump into wireless to maintain their viability.
Dish, the satellite TV provider, is the top candidate for the T-Mobile/Sprint divestiture, as it’s acquired sizable spectrum assets over the years. The Federal Communications Commission has reportedly told Dish it needs to utilize or forfeit its spectrum. Regional cable carrier Altice recently emerged as a potential dark horse suitor for the Sprint assets. And some have even speculated that Comcast – which owns NBCUniversal, Xfinity, and Sky – could enter the market down the road if the new carrier can take on outside investment.
The game-changer would be if a content or cloud company were to become the late entry into the equation. Facebook, Google, and Amazon all have projects to bring Internet services to underserved regions. Both Facebook and Amazon attempted to field a smartphone. And those companies are constantly looking to disrupt poorly served and exposed technology segments.
Any one of these scenarios would reshape the wireless, cable, and content markets.
Background: T-Mobile and Sprint announced their mega-merger in 2017. While regulators support the deal, federal and state lawmakers fear it will put consumers at a disadvantage by leading to higher prices. The asset sale and creation of a fourth carrier is the government’s means for maintaining competition. As the latest deadline for closing the deal approached, the Justice Department threatened to sue to block the deal if T-Mobile and Sprint didn’t come to terms on creating the new carrier. The threat was reportedly enough to move the deal forward. An announcement of terms could come this week, just ahead of the July 29 deadline.