Having been sacked by Federal Communications Commission chairman Ajit Pai last week, the final obstacle to the proposed merger between Sprint and T-Mobile is the Justice Department's antitrust department.
Officials of the Justice Department have allegedly recommended rejection of the $ 26 billion deal that would combine number 3 and No. 4 telecommunications. But blocking the merger would be a mistake.
As part of the FCC's approval process, Sprint filed a financial analysis of its own by independent agents. Contrary to the merger, the analysis found that Sprint is facing "basic problems" as an independent company and "probably not an effective competitor ahead."
If the Ministry of Justice is blocking the deal, Sprint and T-Mobile would not be the only losers. Consumers would also be.
The Ministry of Justice's strongest objection seems to be over competition. Giving Sprint and T-Mobile the opportunity to merge would reduce the number of large telecommunications companies from four to three (Verizon and AT&T are the other two). Theoretically, a smaller number of companies in a market mean less competition, fewer incentives to offer better service and reduced downward pressure on prices ̵
This principle is a good guide in general, but it is not infallible truth. On the contrary, consumers are benefiting fewer companies in the field of telecommunications. Here's why.
Sprint's latest filing with the FCC makes a point clear: Sprint is weaker than it appears. The company has aggressively expanded its subscriber roles in recent years, but this expansion has come at a price. Upon closer inspection, Sprint sprayes. Tired.
According to the FCC filing, Sprint has inflated its reels by including both less valuable non-telephones such as tablets and "migrations" of customers from prepaid to postpay, ie. Customers who are not strictly "new". "
In addition, part of Sprint's expansion strategy included providing customers with" free lines. "Sprint spent some time free service with unlimited data for one year as long as customers delivered their own devices.
These deals have been great for adding customers but less good at building capital. As a result, Sprint has fallen Backward on infrastructure investments and its service has suffered.
"Sprint's network shortages result in diminished customer experiences and perceptions, which in turn lead to customer churn," says the FCC filing. "Churn again leads to fewer subscribers, reduced revenue, and negative cash flows. "
Smaller cash has precipitated further cuts to investment spending, inferior service and more customers" churn. And so with the FCC filing, the "vicious circle" continues. Sprint's investment challenge is a huge responsibility, especially as the telecommunications industry is shifting towards the 5th generation wireless technology or 5G.
Verizon and AT & T have already launched limited 5G services. e will follow later this year, while Sprint's launch is expected in late May, its service will be significantly slower than its competitors and cover less land. As the 5G race warms up, Sprint expects to fall further back.
|VZ||VERIZON COMMUNICATIONS INC.||56.85||-1.33||-2.29%|
|T||AT & T INC.||31.77||-0.14||-0.45%|
|S||SPRINT CORP. 6.61 [0.20] -2.87% [TMUS] T-MOBILE US INC||75.48||-0.65||-0, 85%|
Less is more
telecommunications is a race between four giants: Verizon, AT&T, T-Mobile and Sprint. In practice, however, the first two have exceeded the other two, especially with respect to 5G. When 5G becomes the industry standard, it is hard to see how Sprint will remain competitive.
This concern goes away if Sprint and T-Mobile merge. As it weighs the benefits of the mergers, the Ministry of Justice will be wise to consider the future and then follow the FCC leader's leadership.
If regulators block the deal, Verizon and AT & T will probably dominate 5G, followed by T-Mobile in a remote third. Together, however, Sprint and T-Mobile have been offering meaningful competition to their larger telecommunications brothers.
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Several companies in a market often promote competitive distortion. However, the American cellular telecommunications industry does not fit this form. During 5G there is less.
Beau Brunson is a senior policy analyst at consumer research.