AH Softbank Sprint T-Mobile Merge 1.1

Sprint’s Failure To Purchase T-Mobile May Create Intense Price Competition

August 6, 2014 - Written By Jeremiah Nelson

Sprint isn’t buying T-Mobile, having backed out of the acquisition. In the aftermath, former CEO Dan Hesse has been ousted. His replacement is Marcelo Claure, who was directly responsible for turning Brightstar around and making them profitable. He’s now expected to do the same with Sprint. The job won’t be easy. The process of creating success for Sprint may spark a price war between U.S. wireless companies that will benefit consumers.

Reuters is reporting that analysts are fearful of a crazy price competition on the horizon. Mark Stodden, an investor at Moody’s Investors Service, told them, “Without the ability to compete on scale they are going to have to compete on price, so the two smaller competitors may become increasingly desperate to maintain market share and could become irrational in pricing, which could cause disruptions in pricing in the industry.” T-Mobile and Sprint could go a little overboard in their attempts to retain and add customers, and in doing so they might bring much lower prices to us.

Sprint is investing tons of money in upgrading their network and making it appealing to consumers. For a long time, their network has been flailing. They are investing $5 billion to upgrade, and customers should see the benefits of those upgrades. Sprint is sitting on a large chunk of spectrum that it’s acquired over the years. They are working to put it to use. They are working on the new Sprint Spark network, too. That is currently available in 24 different cities and should be rolled out to subscribers in 100 cities by 2016. It may not be enough. They’re probably going to need to do something else to entice customers to sign up and stay once they do.

Jan Dawson from Jackdaw Research says, “Perception tends to lag reality by good couple years. Non-customers really have a poor sense of network quality. Even if Sprint starts to deliver better performance, it will take time for people to realize that.” Sprint will have to work hard to change that perception. They may do that by dropping prices, and that would create a less expensive wireless landscape for us.