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Sprint and T-Mobile Agree on Terms of $32B Deal
- JoshTriplett 12y agoFast-forward 6-12 months from now, and one or more regulatory agencies will nix this just like they did the AT&T deal.
- jmgrosen 12y agoWould that be good or bad, though? I'm still not sure what to make of it. There's the "viable third competitor" argument, but four is more than three...
- JoshTriplett 12y agoMore competitors isn't always a good thing. This would solve significant problems for T-Mobile, making them a more viable competitor. I'd love to see T-Mobile become the #1 carrier with corresponding expectations of coverage. The AT&T/T-Mobile deal made sense when it was attempted, if only in terms of network coverage. This deal only makes sense if Sprint and T-Mobile plan to merge their LTE networks, since CMDA and GSM don't overlap.
- eggnet 12y agoSprint just bet a billion dollars against that. We'll see what happens.
- saryant 12y agoAT&T made the same bet to the tune of $4 billion and they lost. We'll see.
- jessaustin 12y agoATT is not Sprint. Even this merged company would still be #3, although a closer #3 than Sprint is now.
- ulfw 12y agoYou mean like they nix Comcast/Time Warner Cable? ;)
- byoung2 12y agoMy (rather large) gut tells me the regulators will say no, and T-Mobile will yet again use the breakup money to invest in more spectrum, and come out on top.
- Lewisham 12y agoIt worked gangbusters for T-Mo last time, and let them buy up a whole bunch of spectrum, so fingers crossed it happens again.
- DAddYE 12y agonoob question warning, I don't understand how a breakup fee works in america. If the deal can't happen due to regulators, why Softbank should be accountable for that? EDIT: typo
- JoshTriplett 12y agoThere's no legal obligation to set up a breakup fee, and it's not specific to the US; it's a conventional term in potential merge agreements when there might be an expectation of regulatory interference. The announcement of a merger has major market effects, which tend to improve the standings of one company and not the other; the announcement of that merge failing will have similarly large market effects. The breakup fee is simply a term in the negotiated contracts that specifies what happens if the merge fails to go through; the company whose market standing will fall as a result of the merge failure would negotiate to get paid a breakup fee.
- e40 12y agoIt's just what they (Sprint and TMO) have agreed to.
- aidenn0 12y agoShort answer: Because they agreed to. There is no special law or anything covering it that I'm aware of, it's just that T-Mobile says "This will be a distraction, and there is serious risk that it won't happen. If you want us to take that risk, give us some insurance" Apparently Sprint wants this deal badly enough to risk losing $1B if it doesn't go through, and T-Mobile was canny enough to realize this fact and negotiate for that clause in the contract.
- phragg 12y agoSo this isn't an acquisition of a company correct? It's more of a potential merge (ex: Activision + Blizzard)
- presty 12y agoseems like Sprint is acquiring T-Mobile "Sprint would pay about $40 a share in cash and stock for T-Mobile, about a 17 percent premium to Wednesday’s price, according to the preliminary agreement." "The deal is sure to face regulatory scrutiny, and the early terms of the deal would include a breakup fee of more than $1 billion that Sprint would pay T-Mobile if the deal is not consummated."
- greg5green 12y agoSince both companies are public, the term doesn't fit 100%, but it seems more like a reverse merger to me.
- yellowapple 12y agoI switched from Sprint to T-Mobile a week ago. Oh well.
- recursive 12y agoAre you me? I did the same, and have been getting noticeably better reception ever since.
- byoung2 12y agoI switched from Sprint to T-Mobile in 2011, and I've been very happy I made the switch. The reception is much better where I live and travel and I get a better selection of phones with GSM (I only got world phones with Sprint, which only gave me 1 or 2 choices). Then T-Mobile got better by offering better plans ($20-30 cheaper per line per month than Sprint), no contracts, more upgrades, and most recently, free worldwide roaming. I tested out the worldwide data in the Dominican Republic this month, and it was very useful as an alternative to WiFi. I used to pay $40 a month extra for Sprint Data Worldwide when they offered it, and I left Sprint the minute they discontinued it. I hope T-Mobile stays independent.
- yellowapple 12y agoI hope so, too. Whatever the case, I've noticed far better reception with T-Mobile than I've ever had with Sprint (and this is way up in the Sierras, up near Tahoe; good cell reception is pretty much unheard of up here), plus I'm paying $20 less than what I was for Sprint even with the phone payments factored in, so I'm pretty happy with the switch, too. Haven't tried international roaming (I've never left the continental U.S.), but having that available makes me less nervous about being able to get in touch with someone if I'm abroad.
- wmf 12y agoIf iDEN is any indication, it will take them eight years to merge the networks and by that time your 17-band 6G phone will probably be able to seamlessly bond all the T-Sprint spectrum to provide awesome throughput.
- fredliu 12y agoIMO, if this is approved, would be a better deal than the failed Att-tmobile deal.
- L_Rahman 12y agoI am cautiously optimistic. To get some context for what the new Sprint/T-Mobile might do, it's worth watching this fantastic interview of Masayoshi Son, CEO of Softbank (majority owner of Sprint). http://www.theverge.com/2014/5/29/5761020/i-love-america-and-i-want-to-buy-t-mobile http://www.theverge.com/2014/5/29/5761020/i-love-america-and... He compares American internet to Chinese air pollution, goes on to lambast Comcast, and admit how bad Sprint's network is and how much work there is ahead.
- jychang 12y agoI'm curious of the technical side of things, though. Sprint is CDMA, Tmobile is GSM. That doesn't mix well, at least compared to a ATT/Tmobile merger. As a current Tmobile user, I'd like to keep the ability to switch out SIM cards, but if Sprint buys out Tmobile and replaces it with their network, that may not be possible.
- sargun 12y agoSprint is going LTE, so is T-mobile.
- notatoad 12y agoAren't both CDMA and GSM legacy technologies at this point? It's all about the LTE and VoLTE going forward.
- Churipapiau 12y agoThink about all the countries without LTE, if you travel to one and want to get a local SIM card (since it's usually cheaper) you're gonna need those GSM bands.
- akiselev 12y ago4G LTE is based on GSM technology so as devices get more and more bandwidth heavy most of the network load will be on GSM derived technology. There are likely infrastructure differences on the switching side between TMobile/Sprint but the RF technology is the same since Sprint is moving away from WiMax based 4G to GSM 4G LTE.
- wkdown 12y agoWonder what changes, if any, come to the infrastructure, what with Sprint being CDMA and T-Mobile being GSM.
- kdot 12y agoThat matters less with LTE and VoLTE
- potatolicious 12y agoI really hope this doesn't go through. T-Mobile has been great for me, and shed a lot of the anti-consumer policies of the other carriers. I'd hate to regress.
- donflamenco 12y agoFrom what I understand, if this goes through, T-mobile will be the surviving brand. The current CEO of T-Mobile will run the new company. I am a current T-mobile customer and anti-Sprint. I think this is a good move. This is more of a merger than a buyout.
- abrowne 12y agoAs long as they stay pro-GSM and unlocked phones. And no matter what, it's way better than a purchase by Comcast!
- aidenn0 12y agoI strongly suspect they will move to CDMA, as IIRC Sprint owns far more towers than t-mobile. On the other hand for LTE they should be compatible. [edit] As I said in another thread, my information for that is a few years old, so this may not be true anymore.
- dsl 12y agoSprint has more towers, but they effectively run three different networks on top of them, making it a terrible fragmented mess.
- greg5green 12y agoMore likely that they slowly decommission the CDMA network as both networks move towards being 100% LTE.
- zanny 12y agoI miss Wimax.
- ashbrahma 12y agoGood news is if this deal doesn't go through, T-Mobile gains to make over a billion dollars to make its network better/faster. * AT&T paid about 4 billion in cash and spectrum when the last merger fell apart..
- bicknergseng 12y agoBest business model ever.
- gtremper 12y agonext up, Verizon.
- sbd 12y agoWhere did they announce the terms of the break fee?
- DAddYE 12y agohere: http://online.wsj.com/news/articles/SB10001424052702304655304579552301170337002?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304655304579552301170337002.html http://online.wsj.com/news/articles/SB1000142405270230465530...
- stephengoodwin 12y agoHow does T-Mobile get away with negotiating such good break up fees?
- tpeng 12y ago$1 billion is only about 3% of the deal price. It's not that high considering the regulatory risk.
- jessriedel 12y agoCan only explain the business reasoning surrounding breakup fees? Why does one company stand to lose more or less than another one if things don't go through? Why is the merger worth more to one than the other?
- superduper33 12y agoUnpopular opinion but I hope this does go through. It's currently a duopoly, with over 100% of FCF going to the top 2 carriers (yes, over 100%). Smaller carriers can't compete as they don't have the money to spend on R&D. By nixing the merger/acquisition, it's the equivalent of guaranteeing a duopoly for the future. Would welcome any view that contradicts this though - I've still got a lot to learn about this industry.
- deleted 12y ago[deleted]
- DevX101 12y agoBreakup fees seem to be T-mobile's new business model
- ISL 12y agoAny perspectives on what's likely to happen to Ting's Sprint MVNO status? They're awesome, and T-Mobile's been slowly adopting pieces of Ting's pricing/openness policies.
- maxsilver 12y ago> What will happen to Ting? Nothing. Ting has a contract MVNO agreement. Unless Sprint goes out of business entirely, or breaks their contract (very unlikely), nothing will change for Ting at all. Ting might have to make folks buy new devices (if T-Mobile can succeed in finally shutting off Sprint's legacy 1X and EVDO CDMA stuff), but nothing should happen to Ting that would prevent them from operating. EDIT : Ting themselves commented on this at https://ting.com/blog/what-would-a-sprint-t-mobile-merger-mean-for-ting/ https://ting.com/blog/what-would-a-sprint-t-mobile-merger-me...
- stormbrew 12y agoCell phone company mergers should come with a requirement that their entire combined spectrum block go back up for open bid, with some of it set aside for new entrants. Mergers of companies that control scarce resources have some serious tragedy of the commons problems. There should be a significant cost to doing it.
- bluedevil2k 12y agoThere is a significant cost, to the tune of $32B in this case. The spectrum they purchase is far cheaper than this - estimates for the upcoming FCC incentive auction put each winner around $15B for a 10MHz up/down slice. Besides, if you put a spectrum block back up for sale, wouldn't that help AT&T and Verizon control more spectrum since they'd be in the best position to buy the freshly freed spectrum.
- rayiner 12y agoIn theory, the whole point of privatizing the spectrum is to avoid the tragedy of the commons problems. This seems to have been the winning economic consensus in the 1980's and 1990's, which led to the FCC adopting the auction model for spectrum. Read Tom Hazlett. Or back to Coase: http://old.ccer.edu.cn/download/7874-1.pdf http://old.ccer.edu.cn/download/7874-1.pdf
- stormbrew 12y agoI definitely agree that that was the intent, but that was in the wake of the biggest breakup of a telecom monopoly in history.
- ulfw 12y agoAaaand there goes choice again. Seems in the US landline (at&t/Verizon vs Comcast) and wireless data (at&t vs Verizon vs Sprint) will be available on a oligopoly basis only. Very sad to see Deutsche Telekom finally leave the States. They were the only real innovators in that market.
- zanny 12y agoI like what Freedom Pop, Republic Wireless, and Ting are doing. It is likely that if T-Sprintle was as big as Verizon or AT&T they would entirely drop their support of 3rd party providers and screw over the competitive market under their shoes.
- bruceb 12y agoSame on T-Mobile side with companies like PTEL
- fishywang 12y agoT-Mobile was great, but recently I experienced more and more data drops (have full bar of H or LTE, but unable to connect to anything) around the Bay Area. So I do hope they can have some money (either from acquisition or breakup) to improve their network.
- zw123456 12y agoI am not an expert on this but I do not believe that this merger will pass the Herfindahl–Hirschman Index,test which I think the DOJ takes pretty seriously. That is what I think tripped up ATT when they made the same move. http://www.justice.gov/atr/public/guidelines/hhi.html http://www.justice.gov/atr/public/guidelines/hhi.html http://en.wikipedia.org/wiki/Herfindahl_index http://en.wikipedia.org/wiki/Herfindahl_index I have not done the calcs (too lazy) but maybe someone out there has. My guess is it fails on this test.
- yalogin 12y agoSprint and Tmobile are non compatible networks (GSM and CDMA based). Why does this make sense for them?
- Relic22799 12y agoSprint has some quasi-GSM technology; they acquired Nextel some years back. Nextel utilized the iDEN protocol. iDEN used a time division multiple access (TDMA) network. TDMA is sort of a precursor to GSM. It's small, but there's some overlap.
- ewang1 12y agoJust as long as they keep the unlimited free overseas texting and data, and not raise the prices!
- jboydyhacker 12y agoYou can't take two networks with bad build outs and combine them and get one big great network. Many of the places each is spotty are very similar. Additionally they both use two sep air interfaces which will make integration even more complex. More troubling is that this market needs more competition, not less. To enter the market you need huge swaths of spectrum and having that in the hands of three large competitors vs allowing more competition is unwise for consumers. This deal should be quickly shot down by the FCC/ DOJ. We need more entrants in the space, not less.
- erichurkman 12y agoHave two major utilities/companies ever merged and consumers/taxpayers come out with a better company, better product, and cheaper offerings?
- hayksaakian 12y agoFor comparison: metropcs and T-Mobile (correct me if I'm wrong)
- corin_ 12y agoIn the UK, T-Mobile and Orange merged into Everything Everywere (now just 'EE') 4 years ago. I can't give an objective statistical answer (or even a first hand subjective answer, as I haven't been a customer of theirs - I left Orange a couple of years before that), but from people who are customers to other random conversations, I've heard lots and lots of people say coverage got better due to the merger, and quite a few say prices got better. Don't think I've heard a single person complain (specifically about the merger - some complain about the company, but that's true of any phone company). Edit: there's also the formation of Virgin Media, which has been a major force in the UK for 6-7 years now, and is made up of a couple of mergers (NTL + Telewest to form NTL: Telewest, then a few months later a merge with Virgin Mobile). I've no idea if this made it better or cheaper, but certainly I don't remember ever hearing specific complaints against the merger (either when it happened, or afterwards)
- tottenhm 12y agoThe article suggests that regulators will feel pressure to accept at least one major merger and reject at least one. Among them, a merger of #3+#4 wireless carriers (Sprint+TMobile) to form a new #3 seems less pernicious than a merger of #1+#2 cable operators (Comcast+TimeWarner) to form a new super-#1. (The ~40mil combined customers is almost 10x bigger than runner-up Cox's ~4.5mil.) My fear is that regulators could find the reverse conclusion by focusing on metrics that don't really reflect the competitiveness in each market.
- r00fus 12y agoHorrible psychology to this kind of logic, but it makes sense if you're only thinking in terms of "FCC corporate whoring that can pass the PR smell test", not unlike the "friday news dump".
- arfliw 12y agoWeird that the NY Times would make such obvious mistakes. AT&T Wireless and AT&T are separate companies (AT&T Wireless is not buying DirectTV) The same with Verizon and Verizon Wireless. They discussed four different companies as if they were two.
- adventured 12y agoThis is not accurate. Verizon purchased all of Verizon Wireless from Vodafone this year, for $130 billion. It is now fully owned by Verizon. Vodafone got $59b in cash, $60b in stock, and some other throw-ins. http://newscenter.verizon.com/corporate/news-articles/2014/02-21-acquisition-of-vodafone-stake-in-vzw-complete/ http://newscenter.verizon.com/corporate/news-articles/2014/0... http://venturebeat.com/2014/02/21/verizon-closes-130b-deal-to-buy-out-vodafones-stake-in-verizon-wireless-today/ http://venturebeat.com/2014/02/21/verizon-closes-130b-deal-t... Also, AT&T Wireless is a wholly owned subsidiary of AT&T, so they weren't exactly far off the mark. The modern AT&T is the net result of BellSouth and SBC merging, then SBC eating AT&T and rebranding itself. The mergers gave them total control over AT&T Wireless. The wireless subsidiary's results flow up to the parent, which shows up in the quarterly results for AT&T, and that is why AT&T is worth $181 billion today. AT&T Wireless is paying for the DirecTV purchase.
- gorner 12y agoYou may be working with outdated information. The separate publicly-traded "AT&T Wireless" company disappeared in 2004, and its successor has been wholly-owned by AT&T Inc. since late 2006. Meanwhile, Verizon Communications has always been the majority shareholder in Verizon Wireless, and sole owner since February. Whatever separation there may still be between these operations in the corporate structure (e.g. AT&T Inc. vs its subsidiary AT&T Mobility LLC) is only that - corporate structure. It does not ultimately change what each parent company owns / does.
- deleted 12y ago[deleted]
- flavor8 12y agoAs long as Legere remains at the top I'm cautiously optimistic. TMobile are so much better than Verizon it's not even funny.
- thehme 12y agoSprint promised LTE service a while back and had a slew of phone with this technology as an option that could be enabled. On the East Coast, Sandy came and destroyed much of the infrastructure we were told, so the LTE technology hasn't really been working as we wish and we told it would. With recent mergers, it may be true that these "small" big companies don't "have the financial resources to compete against...larger players [(Verizon, AT&T)], nor the suite of offerings to attract customers who can get a whole host of services from other rivals. As a result, both sides believe that the only way to remain relevant is to combine." I have had Sprint for over 10 years and I like Sprint, my service is fine, and the price that I pay is great. I hope this does not change if this deal gets past the antitrust regulators.
- thrillgore 12y agoTime to crash the FCC's servers again.