There has been much speculation about a rumored merger between mobile carriers Sprint and T-Mobile, a deal whose value could range from $30 billion to over $55 billion.
Conventional wisdom has it the merger of the third- and fourth-largest carriers in the U.S. into one company would have a chilling effect on competition. As such, obtaining regulatory approval for the deal could be troublesome, especially given the current spate of merger and acquisition deals in media and telecommunications already confronting legislators and regulators.
Into the mix enters Sprint CEO Dan Hesse, who insists a third carrier created from this speculative merger would be a legitimate rival to AT&T and Verizon, generating an even more competitive marketplace for services and products. The argument is predicated on the notion the merged companies would be able to make a more serious play for market share, spurring the Big Two (AT&T with 110 million customers, Verizon with over 120 million) to compete in a manner that would benefit consumers and businesses.
"I can't talk specifically about any particular potential merger, but I do think that the U.S. wireless industry would be healthier and consumers would be better off with three strong competitors vs. basically a duopoly, which is what you have today," Hesse said.
Hesse also claimes a strong third competitor would spur AT&T and Verizon to be less complacent and work harder to expand products and services, especially to customers in rural and suburban communities that are underserved, and ripe for development by a stronger third competitor.
"If you combined, let's say, Sprint and T-Mobile together there would be enough customers to build a third network," said Hesse.
One of the main motivators for the both Sprint and T-Mobile is to compete better with AT&T and Verizon in the mobile market given that the latter two companies are well entrenched in other media categories including broadband Internet, land phones and cable television. By joining forces, Sprint and T-Mobile, both of whom only offer mobile phone services and products, may be able summon up the resources to expand into some of these markets.
With the two biggest carriers already strong in phone and media services and aggressively courting new partners (such as AT&T's pending deal with satellite provider DirecTV), Sprint and T-Mobile are hard pressed to maintain a competitive foothold on their own. The two companies believe the only way to accumulate the customer base and financial resources they need to stay on the playing field is to merge.
