Wireless telecommunications provider Sprint (S) aims to expand its share of the cellular services market by acquiring T-Mobile (TMUS), the fourth largest cell carrier in America. This move would not only cement Sprint’s position as the third largest American carrier, but would also increase its mobile spectrum, allowing Sprint to better compete with Verizon (VZ) and AT&T (T), the top two American market leaders.
For consumers, Sprint’s reported interest in T-Mobile is a huge win. If the FCC supports this acquisition, both Verizon and AT&T would need to become more competitive (which means lower prices for consumers). Currently, these two cell giants control such a massive segment of the telecommunications market that they can raise prices as they see fit. Sprint CEO Dan Hesse stated, “A stronger number three will get one and two to react more aggressively so everybody benefits… If you are smaller, the big two do not react as aggressively,” thus suggesting the unhealthy nature of unnatural monopolies.
Unfortunately, the Federal Government and FCC have both raised concerns over the potential deal, claiming that any consolidation of the cellular services market will result in higher prices for consumers. As a result, three companies, instead of the prior two, would set prices and reap the benefits. Both the FCC and Federal Government must give their consent to legitimize Sprint’s deal. However, given the FCC’s current remarks, and undoubted backdoor lobbying by both Verizon and AT&T, consumers shouldn't expect an immediate decision on the T-Mobile acquisition.
If either the Government or FCC rejects Sprint’s request, Satellite TV provider Dish Network (DISH) could purchase T-Mobile, which is ironic given that Dish attempted to acquire Sprint back in 2013. Dish Chairman Charlie Ergen claims that Dish wants to provide “an alternative to the oligopolistic situation [where] two-thirds of American households get access to [only] one or two providers”. Ergen believes Dish could become the third “alternative” with “10 times the speed and lower prices.”
Will either of the “big two” become the “big three” within their respective sectors? Will Verizon, and AT&T continue their increasing price war, only to have Sprint save the day for consumers? Only time will tell. However, if Sprint successfully purchases T-Mobile, AT&T is ready to fight for its high prices by purchasing DirecTV (DTV).