T-Mobile and Sprint’s forthcoming merger will be a real wake up call to the US’ big two

As the $26.5bn merger edges ever closer, we look at the impact it will have on the US’ telecoms market

With the Department of Justice giving its ascent to the long-awaited Sprint and T-Mobile merger last Friday, the deal looks set to complete, once it gains formal approval from the Federal Communications Commission.

FCC chairman Ajit Pai has already come out in support of the deal, saying that he would encourage his colleagues at The Commission to approve the deal.

“This is a unique opportunity to speed up the deployment of 5G throughout the United States and bring much faster mobile broadband to rural Americans. We should seize this opportunity,” he said in a statement to the press.

So, while the deal still has one or two administrative hurdles to clear, its prospects are looking pretty good, with analysts predicting that the deal could now complete in a matter of weeks.

But what will that mean for the US’ big two telcos, AT&T and Verizon? Until now, the two telecoms behemoths have dwarfed their nearest challenger (T-Mobile) for size and scale and, despite the Un-Carrier’s best efforts, have continued to dominate the US’ telecoms landscape.

The merger of third placed T-Mobile and fourth placed Sprint will create a telco that is genuinely capable of challenging Verizon and AT&T in terms of the reach and coverage of its networks. Undoubtedly, 5G will be the battleground where the three contenders will do battle. All four operators have launched their fledgling 5G services, as their marketing teams went into overdrive to claim who has the biggest, fastest and most reliable 5G offerings.

Over the coming months, AT&T, Verizon and the newly merged T-Mobile/Sprint will look to densify their existing networks and continue their 5G network buildout. All three operators are also focussing on 5G as a solution to rural broadband connectivity not-spots, by way of a fixed wireless access solution.

So will the merger have the desired effect and force AT&T and Verizon to rollout 5G quicker in order to keep pace with their newly merged challenger?

“The new merged entity will undoubtedly pose a considerable threat to AT&T and Verizon,” said Paolo Pescatore, Tech, Media & Telco Analyst at PP Foresight

“However, in a rapidly converged landscape, they still lack assets in fixed line and content to take on AT&T, Verizon as well as Comcast. Both mobile assets would be better off being closely aligned with fixed line, cable and or media providers,” he said.

As part of the regulatory approval process, Sprint and T-Mobile were asked to divest their pay-as-you-go assets to a newly created fourth carrier. US satellite television firm, Dish, agreed to purchase the pair’s pay-as-you-go assets along with a significant spectrum holding, in order to maintain competition in the pay as you go sector. Dish has committed to build out its own 5G standalone network but Pescatore believes that this will not have an immediate impact on the big three.

“For now, Dish is unlikely to be a credible threat to the established providers for many years. This will leave the US with arguably three strong nationwide wireless carriers,” he concluded.