Race to 5G: The industry impact of the T-Mobile and Sprint merger
Chances are, you’ve seen the T-Mobile and Sprint merger headlines sweeping the wireless industry. The merger -- which has been caught up in court -- is the latest initiative of carriers large and small turning to corporate consolidations in order to compete in the race to 5G.
While the merger has been approved by the Federal Communications Commission (FCC) and the Justice Department (DOJ), a coalition of state officials say the merger is harmful to consumers because it significantly reduces competition within the industry and can increase prices. Despite the pushback, it appears the merger will likely follow through. So, what does this mean for the industry, the race to 5G, and -- most importantly -- wireless consumers?
Large carriers: Focus on 5G
The race to 5G has been a long time coming, but it continues to be top of mind for the major wireless carriers like AT&T and Verizon. The two dominate the space because they are more equipped to offer and support 5G nationwide due to their size and maturity in the market.
Separately, T-Mobile and Sprint struggle to compete in the race to 5G. Together, though, they have the ability to succeed: Sprint has the mobile and high-band spectrum that T-Mobile needs, and T-Mobile has more resources than Sprint, like cell site density. It appears a priority to come from the merger will be to service 96 percent of rural areas across the U.S. by 2024 -- intensifying the race to 5G.
Regional carriers: Focus on rural communities
One of the merger’s main outcomes is providing 5G to rural areas specifically. Sprint is known for its longstanding relationship with regional carriers, but T-Mobile has been historically unwelcoming to them, a concern to those who oppose the merger. For example, regional carriers are concerned that the new T-Mobile won’t cover customers who travel outside of their service area or provide access to high-quality airwaves and spectrum.
Another concern is from mobile virtual network operators (MVNOs) who fear the merger will have a negative impact on current and future network resource utilization agreements. If T-Mobile chooses to raise rates and restricts coverage access, MVNOs risk losing customers to other rural carriers.
Consumers: Leveling the playing field
Aside from how the merger will affect carriers of all sizes, the most important piece is the impact on consumers. As mentioned earlier, the controversy around the merger began with an anti-trust lawsuit. Because there will be fewer carriers to choose from, the lawsuit claims the merger will drive higher prices for consumers and decrease the amount of coverage available -- specifically in rural and low-income areas and minority communities.
In contrast, T-Mobile claims it will indeed lower prices for consumers and has promised existing customers it will not raise prices for three years. In addition, the company is preparing to bring 5G capabilities to 300,000 new square miles in rural areas -- adding more coverage and more jobs along with the new infrastructure.
As we look back at the effects the merger will have on carriers and consumers, how do we sort through the pros and cons to determine the impact? As mentioned, less competition means there are fewer market players that have more control over the rates, which usually causes more harm to the consumers. However, this may not be the case for the wireless industry.
As it stands, Verizon and AT&T own a majority of the market influence compared to T-Mobile and Sprint. The consolidation of the two into a third major competitor could potentially level the playing field for consumers -- providing a more genuine competitive landscape and fairer pricing model than before.
Whether you’re for or against the merger, the potential for market disruption is worth keeping an eye on.
Jon Mikow is Vice President of Wireless at Fortegra where he is responsible for executing Fortegra’s sales strategy, maximizing sales opportunities, and driving revenue growth in the company’s wireless channel. A graduate of Southeast Missouri State, Jon brings nearly 20 years of retail, wireless, and finance experience to the table, his expertise serving as a valuable asset to Fortegra and the growth of its partners.