Can the T-Mobile Sprint Deal Mean Higher Prices for You? - Stash Learn

Stash Learn

Financial News

Jul 29, 2019

Why a T-Mobile-Sprint Deal Might Mean Higher Prices

With fewer cell phone providers, your bill might rise.

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Update: On Friday, July 26, 2019, the Department of Justice (DOJ) gave T-Mobile and Sprint the green light to proceed with plans to merge into one company.

Under the terms of the deal, T-Mobile will purchase Sprint in an all-stock transaction valued at $26.5 billion. The combined company will be called T-Mobile, and it will become one of the largest wireless carriers in the U.S.

Regulators and the DOJ had raised concerns that the merged company would reduce competitiveness in the wireless communications market, potentially leading to higher prices for consumers, according to reports. T-Mobile agreed to sell off its Dish Networks Corp., a new and emerging wireless carrier, as part of the deal.

Read our previous coverage for more details:

May 21, 2019
Two of the nation’s largest telecommunications companies received backing from the head of the Federal Communications Commission (FCC) to move forward with a merger.

T-Mobile and Sprint have been in talks to merge since April, 2018, in a deal worth $26 billion. The companies are two of the largest telecom providers in the nation, and talks of the merger have prompted fears that they could make the wireless services market less competitive.

The nod from FCC chairman Ajit Pai comes after the two companies promised they would provide new 5G broadband network access to 97% of the U.S., including 85% of underserved rural areas, within three years. So-called 5G access stands for “fifth-generation” cellular wireless, which allows for faster download speeds and the ability to connect more devices.

“Two of the FCC’s top priorities are closing the digital divide in rural America and advancing United States leadership in 5G, the next generation of wireless connectivity,” Pai said in a statement. “The commitments made today by T- Mobile and Sprint would substantially advance each of these critical objectives.”

The merger between Sprint and T-Mobile must be approved next by the full board of the FCC and the Department of Justice (DOJ), which is reportedly less certain.

Details about the merger

  • T-Mobile and Sprint have been in talks to merge since April, 2018. The companies are the nation’s third and fourth-largest mobile providers, respectively. And together they’d create a new telecom giant with a reported 126 million subscribers. Verizon would still be larger than the combined company, with 150 million subscribers, according to reports.
  • Big mergers like the one proposed between T-Mobile and Sprint have sparked monopoly concerns in the past.
  • Sprint and T-Mobile had floated a merger in 2014. Those plans, however, were thwarted by regulators who feared the combined company could create a monopoly. Similarly, in 2011, AT&T similarly attempted to merge with T-Mobile, a move that was also blocked by regulators.
  • A merger between T-Mobile and Sprint, if approved by regulators, would leave the U.S. telecom market with just three big players, sparking fears of a monopoly. A monopoly, generally speaking, is when one company has a lockdown on a market and can control pricing for its products and services without fear of competition.
  • The DOJ must also determine if the deal would harm competition, and may ultimately oppose the deal, according to reports.

More about the FCC

The FCC is the government agency that regulates radio, telephone, TV and cable communications. It is led by a five-person board that votes on mergers affecting the industries it regulates, such as the one proposed by Sprint and T-Mobile.

How could this affect my cell phone bill?

T-Mobile and Sprint have pledged not to raise prices for consumers for a period of three years following the completion of their proposed merger, according to Pai’s statement.

Trade groups including the Communications Workers of America and the Rural Wireless Association, among others, have reportedly expressed concerns that the merger will create higher prices for consumers, and could lead to layoffs as the two companies merge operations.

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Jeremy Quittner is the editorial director for Stash.


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