In the near term, analysts say, that could mean consumers will continue to have access to data plans that charge one price for unlimited use — a practice the biggest companies have abandoned. T-Mobile will focus on frugal urban customers through cheaper, no-contract plans.
“Having competitors to Verizon and AT&T has been critical because they provide more options and put pressure on the big carriers,” said Matt Wood, policy director at Free Press, a media advocacy group. Consumers paid an average of $86 on monthly wireless bills in 2011, up 25 percent from four years earlier, he said.
Through the deal, Sprint will get relief from its crippling $21 billion debt burden. Its financial troubles have stalled upgrades of network speeds to compete with faster services that Verizon Wireless and AT&T have introduced in major U.S. cities.
Sprint chief executive Dan Hesse said that if the deal closes, the company will shift from survival mode to an “investment phase.”
In a joint news conference in Tokyo with Softbank Chairman Masayoshi Son, Hesse referred to the U.S. market as a “duopoly” that could be broken by the “pro-competitive and pro-consumer” deal. Verizon Wireless and AT&T each have around 100 million subscribers. Together they hold six out of 10 mobile device contracts. Sprint is a distant third with 56 million subscribers.
Sprint’s problems are largely of its own doing. It is still reeling from a disastrous and expensive merger with Nextel in 2004, years of poorly rated customer service and its inability to get the iPhone on its system until last year.
The Justice Department and Federal Communications Commission, which rejected AT&T’s $38 billion bid for T-Mobile last year, will probably see consumer benefits to Softbank’s investment, analysts said. Because the deal involves a majority foreign owner, the transaction will be evaluated by the Treasury Department’s Committee on Foreign Investment in the United States for any national security concerns.
“Almost any other deal outside of Verizon Wireless and AT&T Mobility will likely have little issues getting regulatory approval,” Christopher King, an analyst with the investment firm Stifel Nicolaus, wrote in a research note.
Softbank will get a 70 percent stake in Sprint Nextel by buying $12.1 billion in existing shares, at $7.30 per share. Sprint is also issuing $8 billion in new shares that Softbank will buy at $5.25 per share. If for any reason the deal does not go through, Sprint will get $600 million in a breakup fee.