How the Sprint/T-Mobile merger will influence the competitive marketplace

July 31st, 2019 | Emily Groch

Last week, Sprint and T-Mobile won approval from the Department of Justice to merge, provided that they divest Sprint’s prepaid brands and its 800 MHz spectrum to Dish Network, which will become the new, fourth mobile carrier. The companies still have to face a lawsuit brought by a dozen states’ attorneys general. Assuming that the merger does eventually close, here’s how we expect the shakeup to influence industry competition and marketing.

The new mobile landscape

Thanks to the merger, New T-Mobile will have a wide swath of spectrum assets to use for its 5G network, placing it in a much more competitive position against industry leaders AT&T and Verizon than either Sprint or T-Mobile would have been on their own. AT&T and Verizon can expect real network competition from New T-Mobile; they will have to work harder to win and retain customers. Of course, in a worst-case scenario for consumers, the new competition could mirror the Canadian marketplace, where price points and service offerings largely mirror each other across the Big Three, enabling all three to charge very high price points for service.

But positioning Dish as the fourth major carrier is meant to keep this from happening. The challenge, of course, is that Dish has a long, uphill battle before it, as it tries to catch up with the established players. The company has owned valuable spectrum assets for years and has yet to show meaningful progress toward a mobile network. As part of the merger, Dish will purchase Sprint’s prepaid business, amounting to about 9 million customers. But let’s put that in perspective: AT&T and Verizon each have more than 100 million mobile connections. Dish will function as a New T-Mobile MVNO for seven years while it builds its network. If it can successfully build its new network in that time frame, it will still have a long road ahead of it to prove itself as a real competitor and develop a solid subscriber base.

5G Acceleration

The merger conditions include several 5G benchmarks: New T-Mobile has three years to cover 97% of the US population with 5G, and six years to cover 99% (with additional requirements for covering rural populations). While all major carriers are already working on 5G, these deadlines should add some pressure for New T-Mobile and its competitors to deliver on their 5G promises in a timely manner.

Shifting home broadband competition

What’s important to keep in mind is that wireless 5G isn’t just about mobile 5G. Broadband will have new competition, too, from speedy fixed wireless (addressed in Comperemedia’s 2019 Telecom Marketing Trend ‘5G Shakeup). For both New T-Mobile and Dish, being able to offer home internet will be a huge benefit. Both companies will be well-positioned to compete with cable by offering home internet, TV and wireless bundles. With new competition for home internet service in many markets, many ISPs will be pressured to lower prices, and consumers are likely to get better deals on their connections.

Competitor response

Transitioning customers is always a tricky task, and competitors will be there to pick up unsatisfied customers during the reshuffle. New T-Mobile has three years to transition Sprint customers over, which in many cases will involve handset upgrades (to those compatible with GSM), and may include significant price step-ups for those who’ve been grandfathered into ultra-low-rate Sprint plans. Competitors will target transitioning customers with messages that capitalize on frustrations and the general uncertainty of what a New T-Mobile will look like. Prepaid brands are likely to remind Boost and Virgin Mobile customers that they are getting “handed off” to a new company without any say in the matter, in an effort to encourage them to switch. Prepaid brands will also look to lure former Sprint customers that are used to low-cost service. Comperemedia has documented aggressive marketing tactics used by competitors during past telecom M&A activity, such as Fios targeting Time Warner Cable customers after the Charter acquisition in 2017, and cable providers going after U-verse customers during Frontier’s takeover in several markets in 2014.

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What happens to the “Un-carrier” brand?

T-Mobile has spent years cultivating its “Un-carrier” image to great success, so it’s not going to disappear immediately. However, as New T-Mobile builds out its 5G network, becoming more competitive with AT&T and Verizon than ever before, it simply won’t be the “Un-carrier” as we know it. When you’ve got one of the best networks in the business, you don’t need to fall back on gimmicky giveaways and marketing hype to sell wireless service. One of the merger conditions stipulates that New T-Mobile will not raise prices for the first three years after the merger, and, as noted, three years is also a key deadline for its 5G coverage. After that point, expect “Un-carrier” to fade away, at least in practice. For now, it’s business as usual, so get your T-Mobile Tuesdays while you can.

Emily Groch

Emily Groch

Emily Groch is Comperemedia’s Director of Insights, Telecommunications, providing omni-channel marketing analysis and competitive insights to telecom providers.