It’s hard to believe that nearly two years ago, T-Mobile announced the company’s intention to acquire Sprint and create the ‘New T-Mobile’. In order to complete the merger, T-Mobile had to make a number of concessions to regulators. One of the biggest concessions was the creation of a fourth new carrier in Dish and the jettisoning of certain spectrum and assets to make the new company a fairer competitor. There were many roadblocks in the way of the T-Mobile and Sprint union, but ultimately T-Mobile prevailed and is now preparing to launch the next phase of the company in combination with Sprint.
It hasn’t been an easy path to closure with the numerous State Attorneys General filing lawsuits against the T-Mobile merger with Sprint. However, there are solid fundamentals about this new combined company that make it more competitive than separate. My colleague Will Townsend also covered some of these fundamentals in his blog Would a T-Mobile/Sprint Marriage Be a Match Made in Heaven? that supported the rationale for merger approval.
A great illustration of the synergies that T-Mobile and Sprint bring together is the 5G layer cake analogy that represents the combined company’s spectrum holdings. The new T-Mobile now has significant spectrum assets in three key areas, low-band, mid-band and mmWave. This means that the New T-Mobile’s 5G deployment can reap the benefits that each band brings, giving customers high speeds and great coverage while also having the spectrum assets in the middle to balance out the downsides of 600 MHz performance and mmWave shorter propagation. Sprint’s spectrum assets help to fill the gap in a way that simultaneously gives the company much more flexibility to deploy disruptive consumer and enterprise services.
What does this new combined spectrum mean in terms of speeds and coverage? Well, it means that T-Mobile is committing to 14x (yes, 14X) more capacity in its network within the next 6 years compared to today. The company also says that average 5G speeds will be 8x current LTE speeds in a ‘few years’ and 15x faster over the next 6 years. T-Mobile has also committed to providing 5G service to 99% of the US population and have average speeds in excess of 100 Mbps for 90% of the US population. That was one of the company commitments it made to remove some concerns about competitiveness from different lawsuits arising from a number of states. Rural areas that have been traditionally underserved by 4G LTE should also be big winners in this regard. Additionally, the company is planning to launch an in-home broadband service with those 100 Mbps average speeds to compete with the existing providers.
T-Mobile is moving quickly to integrate some of Sprint’s bandwidth-rich mid-band spectrum, committing to $40 billion in investment over 3 years. T-Mobile’s President of Technology, Neville Ray, already tweeted out that the company is presently deploying mid-band 5G spectrum in Philadelphia, the first day of the New T-Mobile’s existence. Keep in mind that Sprint did not yet launch their 5G service in Philadelphia, which means this is a new deployment and not just a roll-over of an existing Sprint 5G deployment. This is a very good sign that demonstrates to me the speed at which the company moves and how well it understands both of the network’s capabilities. Over time, T-Mobile and Sprint’s spectrum will be combined and T-Mobile will expand the number of cities that have mid-band 5G, vastly expanding network capacity. Beyond its impressive spectrum footprint, the combination of both companies brings improved reach into the market. Sprint brings much needed business services acumen that compliments T-Mobile’s historically disruptive consumer services. As a result, the synergies between the two companies are expected to deliver $43 billion in value to shareholders over the next 6 years.
When you look at all of these benefits and potential network improvements, it’s much easier to see why the New T-Mobile is a much more competitive player against AT&T and Verizon. I believe the market needs more competition and I am hopeful the new company will provide this, particularly on the wireless and enterprise markets. Both AT&T and Verizon have been pretty much able to set their own wireless and enterprise prices for years in the US. The new T-Mobile should consequently be well positioned to raise the bar in value across markets and services.
I believe the New T-Mobile has the spectrum and the assets to really be a force for change in this 5G era and that’s why we are so happy to finally see this merger complete. The uncertainty around the merger also created some issues for the industry as the New T-Mobile is a much larger and more competitive player in the market and is likely to change market dynamics as a result. Now that the New T-Mobile has finalized the merger between the two new companies, we expect that there will be many new ‘uncarrier’ moves directly aimed at Verizon and AT&T like when T-Mobile first started their Uncarrier initiative. Fundamentally, both companies had something that the other lacked and together they will likely become a powerhouse that I am sure AT&T and Verizon are likely to fear greatly. It’ll be interesting to see the defensive moves AT&T and Verizon will make and have to be questioning the investment into content. My Moor Insights & Strategy colleagues Patrick Moorhead, Will Townsend and I will be very closely covering this over the next few years and will be keeping everyone up to date with our T-Mobile analysis.
Note: This blog contains contributions from analysts Patrick Moorhead and Will Townsend.