T-Mobile merger with Sprint looks more likely as Softbank and Deutsche Telekom agree on sale
Softbank is making an end-run around concerns about a merger of Sprint and T-Mobile US by instead hitting up T-Mobile's parent company Deutsche Telekom. As reported by Japanese news agency Kyodo, Japan-based Softbank has entered into an agreement with Germany-based Deutsche Telekom to buy the latter's ownership stake in US carrier T-Mobile. The US Federal Communications Commission and Department of Justice have expressed their concerns about the potential for such consolidation in the US cellular market, and the move by Softbank would likely end up still being heavily scrutinized.
The end result (a Sprint/T-Mobile merger) would likely still be the same, though this move might bring the two companies as separate entities under the same umbrella corporation first. Softbank bought Sprint last year for $21.6 billion, and they've been vocal about their desire to also buy T-Mobile. Sprint, too, has been pursuing T-Mobile, though it's more likely that Softbank's even deeper pockets would be better suited to such an acquisition.
We don't have any indication right now of how much the deal may end up costing Softbank (estimates range up to $50 billion), though T-Deutsche Telekom's 67% stake in T-Mobile US. When AT&T attempted to buy T-Mobile and was shot down in 2011, the purchase prices was set at a whopping $39 billion. T-Mobile of 2011 was a radically different company than T-Mobile of today. A good portion of T-Mobile's success today actually comes thanks to the failure of that acquisition, which garnered T-Mobile a multi-billion-dollar break-up fee from AT&T, as well as the spectrum needed to enhance their network.
Deutsche Telekom has expressed interest in the past in unloading their share of T-Mobile US, much like last year's massive sale of Vodafone's stake in Verizon Wireless to Verizon. With Deutsche Telekom wanting out of the US, and Softbank wanting to expand rapidly in the US, it seems all but inevitable that T-Mobile will trade hands. But will such a sale and merger be good for US consumers, and what will happen to the Uncarrier in the process?
Get the best of iMore in your inbox, every day!
Derek Kessler is Special Projects Manager for Mobile Nations. He's been writing about tech since 2009, has far more phones than is considered humane, still carries a torch for Palm, and got a Tesla because it was the biggest gadget he could find. You can follow him on Twitter at @derekakessler.
This is why they pulled out of the H block PCS auction this year, they're banking in acquiring TMUS, and making the big cities, where the bigger chunk of the population lives, their bread and butter. if they can just gain a 5% to 10% of market share in those 100 markets or so, where they plan to deploy Spark in the next 3 years, that's a good 15 to 20 millions added subscriptions, and in big cities with a dense deployment of towers and micro cell sites you could really do a lot of damage in the 2.5ghz band with all the continuous spectrum that they have. They have an average of close to 80mhz of spectrum in most of these cities, with a TDD -LTE, which uses the spectrum a lot more efficiently that FDD-LTE, being used by everyone else.
First of all, TMUS already raised the prices at the end of March, because the were loosing the shirt off their backs, and investors don't like that.
And here the math problem I mentioned. I left Sprint for TMUS on early January, TMUS paid me $900 on ETF's, plus $1000 for 5 BBerries that I traded in at an average cost of $15 on Ebay, so far they spent $1900 just to get me to switch. Now, they are probably making $50 or so on the phones they sold me, obviously, LG, Samsung and Apple are the ones making the money on the handsets, so that's $1900-$200 equals $1700 spent on me to have me as a customer. I pay for 5 lines $175 or so a month, so they need me to be at least 10 months of a paying subscriber to break even, in the mean time cost of maintaining the network and everything else that comes with keeping my service doesn't stop, and obviously, no contract, for me means that the moment someone offers me a better plan, or the chance to switch by paying the balance of my phones, I'm out. As a matter of fact, I live in Miami, Fl and I'm contemplating going back to Sprint (who's paying up to $350 per line to switch) to try the Spark thingy, other people I know tell me that there's a big difference once you get one of the Spark phones.