Analysts Suggest No T-Mobile/Sprint Merger Will Cause One To Disappear

April 11, 2014 - Written By Justin Diaz

The merger between T-Mobile and Sprint is one that some people may or may not have seen coming. No matter the case though, many think that the FCC will never let it happen, with the failed acquisition between ATT and T-mobile that happened years back as an argument of proof. Research analysts from New Street Research are saying that if the merger fails to happen though that at least one of the carriers will end up failing and will eventually cease to exist. The FCC has been pretty clear on their stance about the nations third and four largest wireless carriers merging together as one, they want to keep four major US wireless carriers in play. No less. It looks grim for the merger between Softbank owned Sprint and Deutsche Telekom owned T-mobile as far as the merger goes.

Since Verizon and ATT have much deeper pockets, Sprint and T-mobile just can’t compete when it comes to buying up spectrum for their networks. They have done a decent job at working with they have been able to get their hands on, but it might not be enough which is why DT and Softbank are really pushing to get this merger to go through. If the merger did happen, the two joined companies would still end up being the nations number three carrier, but they wouldn’t just be joining networks and technology, they would also be joining their buying power and would have a more level playing field. Here is what New Street had to say to investors about the outcome of a failed merger, which they are hoping might swings things in the other direction: Our analysis shows that neither Sprint nor TMUS [T-Mobile] have enough revenue to cover their fixed costs and it is highly unlikely that both will capture enough new revenue to do so. Both companies aren’t independently viable at the same time. We show that there simply isn’t enough revenue in the industry for four carriers to cover their fixed costs unless there is a significant shift in market share.

The only winning scenario as researchers at New Street see it for either Sprint or T-Mobile, is each would have to raise around $10 billion within the next year and half to stay competitive, which they feel is highly unlikely because of how saturated the US wireless market already is. If that doesn’t happen New Street is predicting that one of the carriers will ultimately meet their demise, which ends up with that carriers spectrum getting sold off and most likely getting bought up by either ATT or Verizon. The FCC may not like the idea of the merger, but they have also stated that they have a strong stance on fair competition between carriers, something that New Street feels is unlikely to continue if the merger fails.