You may have heard Sprint is edging closer to an acquisition of T-Mobile. What's this all about, and how does it affect people like you and me?
If the deal goes through, T-Mobile would be eliminated from the marketplace, and consumers would lose a newly resurgent player who's willing to needle the nation's largest carriers. To some regulators, that's a compelling argument not to approve a Sprint-T-Mobile merger.
But Sprint claims that it needs to merge with T-Mobile precisely so it can better compete against Verizon and AT&T. Could snapping up the nation's fourth-largest wireless carrier actually improve competition rather than worsen it?
To understand what's happening, we need to look at the other companies that operate in this space. Sprint's chairman, Masayoshi Son, has called the current marketplace a duopoly.
"Some people say in the U.S. now, competition is functioning. T-Mobile is introducing new price campaigns and fighting and increasing, blah blah blah," Son said in remarks at a conference of small wireless carriers in March. But, he said, small and rural firms "are being pushed out by these top two companies and are now getting squeezed."
Regulators have said they like having four national carriers rather than three. Eliminating T-Mobile might concentrate too much power in the hands of a few. That argument has grown increasingly compelling since T-Mobile began its "Uncarrier" campaign and ended contracts, introduced free international data and launched other new perks in an attempt to disrupt the industry.
But for all of T-Mobile's successes on that front — including a very promising increase in subscribers — it's still making less and less money from them over time. T-Mobile's average revenue per user is down 8 percent from a year ago, and there are few signs of an imminent recovery. In other words, T-Mobile may not be able to keep up the fight for much longer if it keeps bleeding.
From where Sprint stands, T-Mobile's unsustainable position makes a merger obvious. And some analysts agree.
"Sprint and T-Mobile aren’t naïve about regulators’ going-in skepticism," said Guggenheim Securites' Paul Gallant. "But they feel the facts are on their side."