Industry Insight: Three’s Company – T-Mobile and Sprint Merger Approved

The approval of the $26.5 billion T-Mobile and Sprint merger by a federal court in New York opens the gates for a long-awaited deal close. Contested by thirteen US states as a marriage that would water down competition and cause harm to the consumer, the transaction is expect to create a formidable third telecommunications player in the US market. The hopes and fears associated with the combined company will depend on thoughtful integration and realization of compelling synergies that could substantially change the competitive dynamic of the US telecommunications industry.

Filling the Layers of the 5G Cake for Competitive Advantage

While mmWave dominated the early spectrum discussions in the early run up to the first commercial 5G deployments, the challenges with coverage and quality of service associated with the spectrum band and need for highly dense implementations quickly shifted the conversation to mid-band spectrum commonly referred to as Sub-6.

Ironically, Sprint’s holdings of legacy WiMax spectrum provides them with highly sought after spectrum in the 2.5 GHz band. In fact, mid-band is so coveted in the US market at the moment that in June of 2019 Hans Vestberg, CEO of Verizon, urgently requested that the FCC release C-band spectrum in the 3.7 to 4.2 GHz range to be used by MNOs (Mobile Network Operators) to accelerate 5G deployments. This is a dramatic about-face from an initial mmWave First spectrum strategy espoused by first-movers in the US 5G market such as Verizon and AT&T.

Image courtesy of T-Mobile

The combined T-Mobile and Sprint spectrum holdings will provide some critical advantages in the 5G race, especially mid-band spectrum that AT&T and Verizon are scrambling to acquire. With T-Mobile’s 600 MHz for extended coverage (especially rural) and growing mmWave holdings, and Sprint’s 2.5 GHz mid-band for higher bandwidth, the combined company will be able to establish a solid foundation for the 5G spectrum cake that John Legere has famously evangelized since 5G marketing blitzes started at the outset of the first commercial deployments.

It makes sense and many of the pioneering operators in 5G markets across Europe and Asia are advancing their deployment strategies on mid and low band spectrum allowing them to lead with improved coverage and quality of experience for new 5G subscribers as well as existing 4G subscribers.

Poised for IoT Leadership with Converged Advisory Capabilities

The Internet of Things is widely considered by operators as an important catalyst for 5G as well as a net new opportunity to monetize value added service opportunities forming at the cusp of cloud/edge computing, analytics and the next generation of multi-access connectivity. It is broadly recognized that professional services will make up the bulk of the IoT market opportunity which is squarely outside of the operator’s traditional focus on connectivity. IoT leadership, especially from an operator’s perspective, will require strong ecosystem partnerships with systems integrators or an in-house capability that can advise across IT, CT and OT domains.

The combined T-Mobile and Sprint portfolio brings together a couple of critical elements that could position the new T-Mobile as an IoT leader among the US operators. These elements are the long legacy of industrial IoT consulting and implementation service provided by the Deutsch Telekom subsidiary T-Systems with 30,000 IT and consulting professionals globally, Sprint Business’ Curiosity platform that was launched in early 2019, and a multinational footprint in Deutsche Telekom’s network of T-Mobile subsidiaries in the US and across Central and Eastern Europe.

The combination of an “in-house” IoT advisory bench with deep experience in industrial technology and systems integration, an IoT platform and multinational IoT connectivity services can position the new T-Mobile to provide value added services and solutions that transcend connectivity services. With a strong core advisory capability augmented by the ecosystem-driven evolution of Sprint Business’ Curiosity IoT platform, the new T-Mobile has what we believe are market differentiating synergies that can be realized through the merger of the two companies.

Rise of a New Kind of Uncarrier?

Part of the deal that T-Mobile and Sprint made with the DOJ and FCC to approve the merger involved concessions made by both operators to meet the US government’s objective of fostering a fourth competitor in the US telecommunications market – Dish. Sprint agreed to sell their Boost Mobile and Virgin Mobile prepaid MVNO subsidiaries to Dish as well as their 800 MHz spectrum portfolio which would be transitioned three years after deal close.

Armed with its newly acquired spectrum and prepaid subscriber base of 9.3 million customers, Dish is positioned to make some interesting plays in evolving themselves as the fourth major US mobile network operator. With its mmWave, Band 70 and intriguing MVDDS spectrum, Dish has the spectrum assets to push a “5G spectrum cake” a la the new T-Mobile built on a mid-band core strategy which could make them a rising force to reckon with in the US market.

While there are many questions and doubt as to whether Dish can become a competitive fourth US operator in the next three years, the company may consider pulling a Rakuten to disrupt the market and the competitive landscape. 5G is a different game that will create new opportunities for new breeds of entrants who can put together winning plays with a winning spectrum strategy.

Implications for Business and Technology Leaders

Absent an appeal that may stymie deal close expected on April 1 of this year, the new T-Mobile has the opportunity to lead the early rounds of 5G market evolution with a compelling spectrum strategy as well as platform and systems integration capabilities needed to pursue a substantial share of the 5G IoT opportunity beyond connectivity. However, thoughtful and well-executed post-merger integration will be key in realizing the aspirational synergies that will enable the combined company to become a compelling and competitive third national operator.

Operators should think twice about a mmWave-driven spectrum strategy. It is apparent that while mmWave holds the key to the promises of 5G, in the early phases of the 5G evolution you really need a 5G spectrum cake. Mid-band spectrum is critical and is becoming increasingly valuable as operators realize that value lies in delivering what matters to customers today – better quality of experience and coverage.

For more insights on neXt Curve’s Converged IT/CT and 5G Evolution research themes contact us for a detailed briefing with one of our analysts. Follow our site to get updates and notifications of our research and our 2020 research agenda.

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Leonard Lee

Managing Director, neXt Curve

February 12, 2020

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