With Verizon and AT&T leading for mobile phone subscribers in the United States, T-Mobile and Sprint have struggled to gain ground in the market. Once lead carriers in their own right, Sprint, in particular, has faced severe financial struggles over the past few years and was therefore in talks to carry out a merger with T-Mobile. However, this Saturday spokesperson from both companies confirmed that they will not be following through with the potentially game-changing partnership.
With its debt approaching $40 billion, Sprint spent the better part of this year working towards a financial turn-around, largely spearheaded by Masayoshi Son, CEO of SoftBank. Through SoftBank, Masayoshi Son purchased roughly 75 percent of the ailing cellphone service provider and has been working diligently towards its financial and public makeover. Marcelo Claure, the current CEO at Sprint, has also worked towards this, with some moderate success.
Sprint did see its customer base broadly increased over the past year, but this was mostly accomplished through discounted rates for plans, thereby negating some of the profits resulting from this expansion. The merger between T-Mobile and Sprint would have created a new company with over 130 million subscribers throughout the United States and would have proved to be a significant challenger to the dominance of both AT&T and Verizon.
However, this Saturday CEOs Claure of Sprint and T-Mobile’s own John Legere confirmed that the two companies were unable to achieve a deal. Legere identified the main obstacle as a lack of clear long-term benefits for T-Mobile customers and shareholders, while Claure simply stated that Sprint’s future prospects were best pursued on its own. That said, he did acknowledge that the merger would have offered “benefits of scale,” namely in terms of an increased pool of potential subscribers.
While the failure of the merger might prove a negative for both T-Mobile and Sprint, others have identified it as an ultimate win for the customers. University of Michigan Business professor Erik Gordon noted that because of the merger’s failure, both companies will continue to compete. Therefore, it is likely that they will continue offering discounts and other perks in an attempt to lure customers away from AT&T and Verizon. While Gordon’s view is optimistic, it fails to account for how these marketing ploys will hurt both companies long term. Sprint has already shown that while it can pull in new customers through creative deals, these measures have done little for the company’s colossal debt. Only time will tell what effects the merger’s failure will have.