March 9, 2020 Technology
The telecommunication industry has eyed regulators since T-Mobile US announced it would purchase Sprint Corp. for $26 billion two years ago.
The question is whether regulators would allow the third and fourth largest mobile networks in the U.S. to merge. They received a boost in late February, when a federal judge in the U.S. District Court in Manhattan signed off on the deal.
Not only will the deal allow for a faster rollout of 5G technology, it could also usher in a new stage in telecommunication acquisitions, involving mobile operators and cable providers.
The new company, which will operate as T-Mobile, will have about 100 million customers.
One hurdle remains in this megamerger. The California Public Utilities Commission, which oversees telecommunications services in the state, will need to sign off on the deal. While the agency could reject it, analysts expect the combined company to agree to some concessions to secure the merger. A decision will likely come through in the next few weeks, according to The New York Times.
In order for the deal to close, Dish Network Corp. paid $5 billion to purchase Boost Mobile from Sprint, as well as spectrum licenses from T-Mobile. Dish will be positioned as the fourth wireless network carrier in the U.S.
The deal caught the attention of telecom industry, not just due to the size, but because the merger is motivated by an expansion of the rollout of 5G services. Consumer groups, however, countered that reducing the number of large mobile operators could increase prices, among other concerns.
“Going from four established nationwide wireless networks to only three — with the possibility that we might someday, eventually, get some version of a fourth network added back into the mix — will be extremely damaging to competition,” said George Slover, senior policy counsel at Consumer Reports, to USA Today. “It will degrade the choices available to consumers, the options for network access, and the incentives to create better and more innovative service.”
The district judge and the Federal Communications Commission disagreed, allowing it to move forward.
Some believe this decision could set off a string of mergers, particularly those between wireless carriers and cable providers. In the last six years, cable and satellite providers first consolidated within its industry. Then mobile providers followed suit. There’s an expectation that the third string of tie-ups will come in the form of wireless carriers merging with regional cable companies.
Industry analysts are eyeing Charter Communications as a potential pendulum for any additional shift. The second-largest cable company in the U.S. briefly flirted with the idea of a sale in 2017, drawing interest from the likes of Verizon Wireless at the time.
“The cable industry has fiber assets that are close to the end users and therefore can be the critical backbone for a dense 5G network build,” LightShed Partners telecommunications analyst Walt Piecyk told CNBC.