How the Sprint/T-Mobile Merger Will Affect You
The DOJ has approved the $26.5 billion T-Mobile and Sprint merger, dropping the major U.S. wireless carriers from four to three. Here is why that likely means higher prices — not lower bills — for you.
Late last month, the U.S. Department of Justice (DOJ) finally approved the $26.5 billion merger of telecom giants T-Mobile and Sprint, thus bringing the number of major wireless carriers down from four to three.
Billshark, which offers T-Mobile bill negotiation, would like to tell you that this move will result in better service and lower bills, but unfortunately that will probably not be the case. In fact, the opposite will likely prove true.
1 Background
Last year, T-Mobile’s and Sprint’s boards approved the all-stock merger between the two companies, the third- and fourth-largest wireless carriers. The resulting merger hands the new entity—which will be known as T-Mobile—more than 127 million customers, automatically making it the third-largest player in the game, after AT&T and Verizon — a lineup worth weighing when you compare how the major carriers rank.
The DOJ approval was held up while anti-trust investigators tried to find a workaround to allow the merger to go through. Their solution: Require the two firms to sell certain business elements to Dish Network, which is supposed to bring Dish onboard as a viable competitor to the Big Three. In return, Dish promised to provide new wireless service to 70 percent of the nation.
2 The Players’ Claims
The two companies claimed that only through merging could they obtain the resources required to build and deploy the long-promised 5G service nationwide, a speedier and more reliable next-generation upgrade to the current 4G. The merger, they claimed, would make them a viable competitor with Verizon and AT&T.
The DOJ remedy of forcing the two companies to divest various assets supposedly solved the problem of concentrated power by propping up Dish as a new fourth competitor in the market.
“The [required divestitures by Sprint and T-Mobile] set up Dish as a disruptive force in wireless,” said Makan Delrahim, head of the DOJ’s antitrust division.
3 The Likely Reality
Dish, which is already struggling to maintain customers, however, is not likely to surface as a major competitor to the Big Three, according to analysts.
“We have serious concerns that cobbling together this new fourth mobile player, with the government picking winners and losers, will not address the merger’s harm to consumers, workers, and innovation,” New York Attorney General Letitia James said in a statement when the approval was announced.
“I don’t see the benefits for consumers in a marketplace where Verizon and AT&T and the new T-Mobile would be calling all the shots,” Michael Copps, a former FCC commissioner and special advisor to the watchdog group Common Cause, told CNNMoney when the prospective merger was announced.
The consumer watchdog magazine Consumer Reports was likewise skeptical at the outset.
“This merger raises several red flags for consumers,” said Jonathan Schwantes, senior policy counsel for Consumers Union, the advocacy division of Consumer Reports. “Right now, Sprint and T-Mobile provide much-needed alternatives to Verizon and AT&T, with some innovative plans and pricing options that keep some semblance of competition alive. If you combine these two companies, those incentives and options could dry up.”
The merger will still need the approval of a judge, expected late this year.
4 What It Means to You
Sprint customers will gradually migrate to T-Mobile if they haven’t already: About half of Sprint’s phones already support both networks.
Once the 5G infrastructure is in place—some years down the road—expect faster and more reliable service. And expect to pay dearly for that service.
Observers believe that, in the short term, prices may see a slight dip as Verizon and AT&T move to blunt the novelty of the new T-Mobile. In the long run, however, the monolithic carriers will have little reason to cut prices or provide better service, given the lack of competition in the industry.
Because Sprint was the low-cost alternative to AT&T, Verizon, and T-Mobile, with starting plans half the cost available from the other three, analysts expect data plans to quickly jump across the board. Also look for unlimited plans to go the way of landlines, they predict.
As the intricate plans and pricing structures of all the carriers become more and more impenetrable to customers, this is all the more reason for you to submit your bills to us for scrutiny. Remember, our review is free; we charge nothing if we’re unable to save you money.
