There’s one critical thing to understand about big merger rumors – they usually don’t make it past the rumor stage. The idea that T-Mobile’s parent Deutsche Telekom might buy Sprint has popped up periodically (most recently in 2008) among stock-market analysts, but it’s a horrifying bad idea that fortunately never makes it past the idea stage.
The rumor raised its head again today, but the idea hasn’t improved in quality at all.
1. The Technologies Don’t Match. This is the biggest objection, and it’s very real. Sprint right now is struggling with three incompatible radio technologies – CDMA, iDEN and WiMAX. The difficulty of merging the CDMA and iDEN networks may be one of the things that caused Sprint CEO Dan Hesse to publicly regret absorbing Nextel. T-Mobile has no technology overlap with Sprint. They would add two more, incompatible network technologies – GSM/UMTS and their anticipated LTE network. The result would have no economies of scale, merely an economy of confusion.
*** This is mostly correct. While T-Mobile does in fact use GSM/UMTS and Sprint uses CDMA exclusively on the “Sprint” side, and iDEN on the “Nextel” side, both are semi-compatible with GSM. GSM has an evolutionary path that leads it to LTE, which of course CDMA has almost ironically the same path leading to the same LTE. The difference is that Sprint has decided to move away from LTE (its rumored to still be in testing at Sprint, “just in case”) and has bet its chips on “WiMAX”. T-Mobile on the other hand, while it discusses 4G as LTE, it also hinted recently that they are testing and keeping options open in terms of WiMAX. Meaning, merging the two could prove successful, if they reach that common path of LTE or WiMAX, whichever it seems will be bigger, faster, and more compatible worldwide. LTE gets the title of faster and more compatible technology wise, but not frequency wise. Each country has different frequencies, making it all a “cluster-fuck”. WiMAX however has 2 distinct frequencies in use 2.1 and 2.5GHz, and only Russia, Korea, and the USA are in actual consumer use, all other countries are still in development and trials…Although WiMAX is to the table fast, and in general more standard frequency, it would seem the cheaper, more logical solution is LTE. Either way, Sprint and T-Mobile will remain technologically incompatible till EITHER come to terms with 4G. However, important to note, former parent of VoiceStream (pre-T-Mobile merger), Western Wireless who in turn was bought out by Alltel, ran a CDMA/GSM network without issues, Verizon who bought Alltel still runs that GSM/CDMA network in most areas, and the areas they had to divest are run by AT&T, who is full GSM.
2. Big Mergers Always Create Indigestion. The track record for large-scale wireless mergers isn’t good. The AT&T/Cingular merger caused network problems for years. The Sprint/Nextel merger is widely considered to have been a disaster. Mergers in wireless typically work when it’s a much bigger company swallowing a much smaller one – Verizon/Alltel, for instance. In this case, smaller T-Mobile would be trying to absorb much larger Sprint.
*** Totally true! Cingular was happy by itself. T-Mobile is happy by itself. AT&T NEEDED someone to buy them out after a botched attempt to create a “Next Generation” network based on GSM. Sprint was completely happy till Nextel (iDEN and its dying technology) needed someone to buy them out, and Sprint got a little over zealous about remaining a super-wireless carrier.
The fact of the matter remains that a large carrier simply can not merge with another large carrier. There are too many billing systems, network compatibility, and even device issues to deal with. Lets not even get into coverage, rate plans, divesting, and “culture” employees may hold on from one company to another, particularly in business ethics and policies. Thats a whole other story.
At the end of the day, the last big mergers to happen in the last year were T-Mobile buying out smaller regional carrier (which most of its network is smaller regional carriers merged into one big carrier), Suncom…right after the full integration of the AT&T mobility divested Cingular Wireless which went to T-Mobile. Sprint on the other hand hasnt really bought out much of anyone except the smaller regional carriers that operate as Sprint, and under STRICT contracts that Sprint can not operate another network in those areas, making Nextel a rather stupid choice to begin with, except for the spectrum and towers alone. Verizon recently merged with Alltel, and divested a large chunk to AT&T mobility, but somehow has almost perfectly integrated both networks into one. Sometimes a merger of a big company with a little company works. Rarely does the merger of a little company with a big company work. And certainly even more rare is the merger of equals working out for the good.
3. George W. Bush Isn’t President. The Obama administration has said they’re going to take a much tougher line than the Bush administration did on mergers that may reduce competition, and merging two of the four national wireless carriers would get the ultimate scrutiny. Since neither T-Mobile nor Sprint are on the verge of failure, it’d be hard to paint this merger as a rescue.
*** I dont think ANY wireless company is on the verge of failure. Sure Sprint might be hard up, but its far from going to fail anytime soon. The spectrum value alone is worth much more than the actual networks it operates. Lets also think about it… Companies that exist currently, AT&T, Verizon, Sprint, and T-Mobile are all secure enough to have purchased another carrier in recent as 4 years time, which means to me and likely many others, that they are secure enough to be standing. It’s those little companies that didnt stand a chance. And if these major companies want to merge, then one of them HAS to get in such financial turmoil, and drop value in such a drastic way, that they too become one of the smaller carriers. Even the smaller national carrier T-Mobile isnt small enough for any of the big carriers to buy, simply because it’s still big enough, and has enough money that another big carrier couldnt afford the price. Lets also not forget that the price of a carrier isnt just billing systems, networks, and operations, but also the price of the customer.
4. There’s a lot on T-Mobile’s Plate Right Now. T-Mobile’s UK division is trying to merge with Orange, another UK carrier. So obviously, what T-Mobile corporate needs is to handle another mega-merger at the same time. That makes perfect sense. Right.
*** T-Mobile has so much on its plate right now that it isnt really BUYING companies or making LARGE mergers except for Orange-TMobile UK, but is selling off smaller stake it has in other companies worldwide. Not because it needs the money, but because it needs to focus on “T-Mobile” as a brand, expand itself, and to not have full control over the networks it might have a “stake” in just isnt in its favor, or future. T-Mobile has a focus of restructuring its UK, German and US brands (the biggest of the T brands), with faster 3G, pre-4G tech, and more coverage, at a pricing point proving attractive. Merging with another company also doing the same seems attractive on paper, in reality, both companies like Sprint and T-Mobile have different routes and ways to achieve the same goal.
5. Sprint Doesn’t Have the Answer for T-Mobile’s Woes. Apparently, T-Mobile CEO Rene Olbermann is concerned that T-Mobile is stuck in the lower-cost area of the marketplace. Guess what? So is Sprint. T-Mobile is a metropolitan-focused carrier with shorter-range AWS and PCS spectrum rather than the longer-wave cellular and 700 bands. So is Sprint. T-Mobile is having trouble figuring out how to get their customers to pay more dollars per month, while upstarts like MetroPCS and Cricket cut away at their lower end. Ditto Sprint. In this case, banding together doesn’t look like they’d come any closer to solving those problems.
*** T-Mobile and Sprint in the USA are both the lower price leaders of “National” coverage. Simply put, in order for them to not lose out customers to start-ups like MetroPCS and Leap Wireless, they HAD to price themselves aggressively on the lowest end possible. The great news is that both companies have some pretty decent experience at building a customer base (loyal or disloyal) because of it. At one point Sprint was all about just having people sign up left and right, regardless of credit, payment, etc. Now they are a little more focused on just pricing themselves to get people who are price savvy and need dependability in a national carrier to sign up. Credit restrictions, and deposits have become more stringent then in previous years. T-Mobile however, has always priced itself less, kept customers happy with that lower price, and gave them exactly what they wanted..A wireless national carrier in the price range, minute range they desire. Point blank!
6. T-Mobile Doesn’t Need Sprint’s Problems. Sprint is still coping with culture and technology clashes in the wake of the Nextel merger. They’re recovering from lingering customer service problems, they seem confused about their prepaid strategy, and they have a complex and perplexing relationship with Clearwire and their on-again, off-again cable company partners. They’re improving, to be sure, but they still have a road ahead. T-Mobile, which prided itself on running a streamlined business with great customer service, doesn’t need that kind of drama.
*** Thats right, T-Mobile DEFINITELY doesnt need Sprint’s problems. As mentioned above, T-Mobile has enough on its plate, but also has more than enough to deal with without not only Sprint culture and issues, but Nextel culture differences, something even Sprint hasnt worked out. Lets not even go on about PrePaid, and how T-Mobile has this ALMOST figured out, and Sprint has almost ZERO idea about. The #1 prepaid service of the BIG 4, is AT&T. They had it right from day 1 with GoPhone, and through all the mergers, their hybrid-Prepay plan is still one of the best in terms of coverage, price, minute options, and the least possible billing errors. T-Mobile follows next, but Boost (Sprint subsidiary) follows closely in almost what Id call a tie, in price, flexibility, and coverage. Unfortunately, billing errors, and network issues ensue both even more so when Customer Service for both do not take care of the customer, and treat the prepaid customer as if they were idiots, or swindlers.
So… what are your thoughts?
Sprint and T-Mobile – sounds great for customer service, HotSpot technology on a 4G scale, and with spectrum..on paper.
In practice, these are simply two companies that should never merge until one common 4G technology is selected, and only for strategic reasons of operating as one large single carrier with that one common 4G tech. But…thats just me. While Id love to see T-Mobile and Sprint merge for more dual CDMA/GSM phones, and for coverage that “worldwide” is impossible to beat, with fantastic customer service, it’s not ever likely to happen.. .Ive learned to deal.
