An official press release that came after the close of business Friday says the Sprint and T-Mobile are definitely calling it quits. Reuters picked it up and it looks like everyone else’s story is based on that story.
I’ll believe it when it doesn’t happen, to paraphrase the late great Yogi Berra.
The two companies have been dancing around this deal for years now, and every time, this blog has been here to remind readers what a bad deal it would be for consumers. I’m not saying I had anything to do with them calling it off — if indeed they did — but at least I didn’t have anything to do with them actually seeing things through. Not sure if I could sleep at night if I had.
So what’s ahead for the two companies?
For T-Mobile, it’s business as usual. They’re free to keep breaking the rules and forcing the big competitors to follow their lead. T-Mobile has wisely invested in chunks of 5G spectrum that could lead to the fastest phones in history. The only issue there is that they haven’t convinced Apple or Samsung to actually support their 5G networks yet (that I know of.) I’m sure they will eventually, though, just as Sprint eventually convinced both companies to support their wackadoodle 4G implementations.
For Sprint, though, this could be the canary in the coal mine. The company is laden with debt and a lot of its assets aren’t really very saleable (see my previous “wackadoodle” comment.) The company which started in 1899 as “Brown Telephone,” was once part of the same GTE empire which spawned Verizon, and was acquired by Japan’s Softbank just a few years ago, has never been in worse shape. This morning its stock dropped about 13% because many on Wall Street saw a T-Mobile merger as the only way out of debt.
This may be the turning point for Sprint. Short of a bankruptcy and purchase by someone else, it clearly never will reach market dominance or compete with AT&T or Verizon. This reduces the number of choices that consumers have and it’s hard to know how sustainable Sprint’s business model as at this point. Certainly, because cell phone manufacturing contracts are signed years in advance, the company has two or three years left, but if they continue to drop, major manufacturers like Apple and Samsung just won’t see the point in supporting Sprint’s network, and that means they’ll be limited to economy-brand phones, a clear death blow in an ever-more-competitive and status-conscious cellular market.
As much as I have beat on Sprint in the last six years of blogging here, I don’t want to see them go away. I think healthy competition is good for everyone and cell technology in the US still sadly lags behind other countries. I’d like to get American using 100Mbps cell service and paying less for it. One way that happens is with robust competition.
So, bottom line here folks I see three possible outcomes of today’s news:
1. It’s true – the merger is off and Sprint dies slowly.
2. It’s false – Sprint’s parents make a desperate attempt to save the deal.
3. It’s unclear – No one knows if talks are really continuing and I keep writing articles like this one.
I admit, it’s hard to know what’s better.