Sprint-T-Mobile Puts No Immediate ‘Substantial Competitive Pressure’ on Verizon, AT&T

**Editor’s Note: Which is America’s top wireless network? Click here to see what we discovered. Or click here for a recap of the biggest communications mergers in Q2 2014.**

Analysts at investment bank FBR & Co. say it’ll take a while before the as-yet-unannounced, $32 billion Sprint-T-Mobile merger poses a threat to rivals Verizon and AT&T.

In a July 24 client memo, David Dixon and Mike He cite one key reason: Integration.

If the Sprint-T-Mobile deal comes about, the time frame required to bring together each organization’s systems, processes, infrastructure and people stands to slow down the combined company’s ability to compete with Verizon and AT&T.

“If Sprint and T-Mobile merge as we anticipate, integration activity will be substantial in order to better position this asset with consistency from improved coverage and capacity,” Dixon and he said. “Until the combined asset becomes an effective substitute to Verizon and AT&T in the high-end postpaid and enterprise segment, we would not expect substantial competitive pressure on the two larger incumbents in market segments where they currently enjoy an effective duopoly today.”

Both Sprint and T-Mobile have large, lower-end consumer prepaid bases; these tend to be comprised of people concerned about costs. For its part, T-Mobile has been making bold moves to attract its competitors’ customers, such as rolling out plans with no annual contract, paying other carriers’ early termination fees, and offering unlimited data access, among other strategies. The company also recently launched its channel partner program targeting business clients. Sprint has had an indirect channel initiative for some time.

Still, those efforts may not be enough, as Verizon and AT&T “are not standing still” while the industry waits around for the Sprint-T-Mobile news, Dixon and He wrote.

To that point, Big Red and Ma Bill are “aggressively investing” in radio access networks and fiber, laying the foundation for next-gen infrastructure, from which both companies stand to profit, they noted.

To be sure, observers are starting to wonder whether Sprint and T-Mobile will merge. Dixon and He discounted rumors that the Sprint-T-Mobile deal may not materialize. People are backpedaling on reports – “incorrectly, in our view,” they said. Right now, it’s just a question of when Sprint and T-Mobile will go public with their much-discussed marriage.

A joined Sprint-T-Mobile would boast about 100 million subscribers, making it a serious rival to both AT&T and Verizon Wireless; of course, it still would need government approval, something U.S. regulators blocked nearly three years ago when AT&T tried to buy T-Mobile, citing a preference for a “big four” system. This merger would reduce it to the “big three,” but with all being roughly the same size, the acquisition might be seen with less trepidation.

Because they don’t think Sprint-T-Mobile will cause too much immediate stir, Dixon and He just upgraded Verizon Communications to “outperform.” They increased their price targets from $55 to $57, saying Verizon will experience “tailwind” from the as-yet-unannounced combination of Sprint and T-Mobile.

Verizon is the largest wireless operator in the United States, followed by AT&T, Sprint and T-Mobile. 

Leave a comment

Your email address will not be published. Required fields are marked *


Which will be the first activity you participate in at the Channel Partners Conference & Expo?

View Results

Loading ... Loading ...
The ID is: 88672