After many of years of rumors and speculation about T-Mobile and Sprint merging, the two have finally come to a deal that was announced on Sunday. T-Mobile and Sprint will hence be consolidating, with the former shelling out $26.5 billion for the latter. The two attempted to work out a deal a few years ago, back when Sprint was the third largest carrier and T-Mobile was the fourth, but under the Obama Administration, regulators told both companies that the deal would get blocked. So the two decided to wait until after the upcoming election and try things again. But T-Mobile had since outgrown Sprint, making it a bit tougher for Sprint to purchase T-Mobile, and now has decided to have T-Mobile purchase Sprint. Which now leaves the US with three major carriers. The bumpy road from four national carriers to three really started with AT&T attempting to buy T-Mobile in 2011, and eventually dropping that purchase after it was blocked in 2012. Let's take a look at the timeline for both companies and how they became one, or are hoping to, at least.
T-Mobile: AT&T Attempts to purchase T-Mobile in March of 2011
In March 2011, AT&T had announced that it was going to purchase T-Mobile in a deal valued at $39 billion. At the time, T-Mobile had around 33 million customers, so it was by far the smallest national carrier in the country. On August 31, 2011, the Justice Department announced that it would seek to block the acquisition of T-Mobile. AT&T then decided to abandon the bid to buy T-Mobile in December of 2011. That invoked the breakup fee that T-Mobile's parent company Deutsche Telekom had put in the contract, and it was a juicy one. In the breakup, Deutsche Telekom received $3 billion in cash from AT&T, as well as around $1 billion worth of wireless spectrum. A year later, T-Mobile hired its current President and CEO, John Legere.
T-Mobile: John Legere Takes the Reins as President & CEO
In September of 2012, T-Mobile announced that it was hiring former AT&T executive John Legere as its new President and CEO. Legere spent nearly 20 years at AT&T in various positions, and then went on to Dell and Global Crossing before being appointed by Deutsche Telekom to lead T-Mobile after the failed AT&T acquisition. When Legere was announced as the new CEO, he had a very different look compared to his current one, and a very different attitude, but he came into T-Mobile with a plan, and that started with the purchase of MetroPCS.
T-Mobile: MetroPCS Acquisition
Less than a month after getting a new CEO, T-Mobile had announced it was purchasing MetroPCS - the largest prepaid carrier in the US. The deal would add a little over nine million new customers to T-Mobile, bringing the combined company closer to the third largest carrier, Sprint. The acquisition went through with little issues, the Justice Department did not seek to block this merger like it did the AT&T/T-Mobile deal. MetroPCS was bought mostly for its spectrum, since T-Mobile did not have an LTE network at the time, and it was in need of some spectrum to build out LTE infrastructure. Despite MetroPCS being a CDMA carrier and T-Mobile using GSM, the Magenta brand picked up MetroPCS to help jumpstart its LTE network, since MetroPCS was actually one of the first to build out LTE, though it was limited to just major markets. But that did help T-Mobile get a headstart on building its LTE network, after it pushed users off of MetroPCS' aging CDMA infrastructure.
T-Mobile: The Un-Carrier Revolution Begins
This is arguably the biggest part of T-Mobile's success in the past five years. In early 2013, T-Mobile's CEO, John Legere made a big announcement. The carrier was going to be dubbed the "Un-Carrier," essentially changing all of the pain points about wireless today. It started by eliminating contracts. Instead of having the traditional contract, you would be paying monthly for your phone and when the phone was paid off, your bill would go down - a bit different from subsidized smartphones, where your bill stays the same price forever (or goes up). Through the next five years, T-Mobile would host 13 different Un-Carrier events that would eliminate pain points for customers. This included things like free unlimited global roaming, upgrades for all with JUMP! and JUMP! On Demand, zero-rated data for streaming music, and later for video. There was also Data Stash wherein users were able to "stash" their data for another month if they didn't use up their entire data cap that month. And this all led to T-Mobile coming out with T-Mobile ONE in Un-Carrier 12.0. Which essentially took all of T-Mobile's plans and combined them into just one, which offers unlimited data, talk, and text.
The Un-Carrier moves started out as what looked like a way to get press coverage and stay in the headlines, hoping to bring over more customers and grow the company. But after a few months, its competitors started following suit. Today, all of the US carriers have dropped contracts, all have unlimited data, and all have zero-rated data in some form (AT&T has it for HBO and DIRECTV NOW, Sprint for Hulu, and Verizon for Go90). The unconventional business strategy also helped T-Mobile almost double its subscriber base in just a few years, pulling past Sprint to become the third largest carrier in the second quarter of 2015, some two years after the Un-Carrier revolution began.
T-Mobile: 2017 - Four Straight Years Of Adding Over Five Million Users
Since launching the Un-Carrier initiative in 2013, T-Mobile has been on a tear, adding over 30 million customers in just four years. As of the fourth quarter of 2017, T-Mobile had 72.6 million subscribers. That's closing in on double what the company had in 2012 when it acquired MetroPCS and hit 42 million. This is impressive seeing as before Legere took the reins at T-Mobile, when it was losing millions of customers each quarter, Deutsche Telekom wanted to get out of the US as soon as possible. As of T-Mobile's last quarterly earnings, the company had added over five million users for the past four years straight, and added over a million subscribers in each of those quarters. The telecom giant has also upped its revenue, with its 2017 turnover increasing 8.3-percent over 2016's revenue. All while spending more money on its network to become the "fastest LTE network in America," according to third-party testing and research. To say the least, the Un-Carrier approach has worked for T-Mobile.
Sprint: SoftBank Purchases a majority Stake
In October of 2012, SoftBank announced that it was purchasing a majority stake in Sprint, meaning that it would no longer be a US-owned wireless carrier (at the time, Verizon was majority owned by Vodafone, and T-Mobile's majority owner was and still is Deutsche Telekom). SoftBank purchased 70-percent of Sprint for $20.1 billion. Since then, it has increased its stake in the company to nearly 85-percent. Dish had also put in a bid to purchase a majority stake in Sprint, which was higher than SoftBank's bid, but it ultimately pulled out and focused on acquiring ClearWire. Dish also pulled its bid for acquiring ClearWire, which allowed Sprint to absorb it instead. The reason behind purchasing ClearWire was to make use of its 2.5GHz spectrum.
Sprint: Talks with T-Mobile (Round 1)
Rumors began in December of 2013 that Sprint and T-Mobile were in talks over a merger. These rumors and speculation continued into 2014, before the company ultimately canceled the talks in August. Neither carrier confirmed that the negotiations were going on, but it was clear that both CEOs (T-Mobile's John Legere and Sprint's Dan Hesse) were in Washington talking with regulators about a potential deal for weeks, in early 2014. But regulators reportedly told Sprint and SoftBank that they would seek to block a potential deal, citing that they wanted four national carriers. The combined company was rumored to be named "SoftBank USA," with Legere being appointed as its CEO, and Hesse moving to the board of directors. After nearly eight months of talks, the two companies decided to go at it alone and possibly try again after a new administration came into The White House, with the next presidential election slated for late 2016. With that, SoftBank decided to make some changes to its top-level executives and replaced Hesse who had been CEO of the company for about seven years by then. SoftBank CEO Masayoshi Son brought in the founder of BrightStar, another company that SoftBank had a stake in.
Sprint: Marcelo Claure Becomes CEO
In August 2014, Son made the move to relieve Hesse of his duties and appoint Marcelo Claure - founder of BrightStar - in his place. Claure had run BrightStar which SoftBank had already purchased a stake in, and later acquired the company so that Claure could take over Sprint. When Claure started at Sprint, he had a lot of work to do. The carrier was hemorrhaging customers left and right. Much like T-Mobile when Legere took over, Sprint was also losing millions of customers each quarter. Sprint had also made the mistake of going with WiMAX instead of LTE, which put it behind its competitors and also slowed down its network. So Claure also had to spend a good amount on Sprint's network so that it could compete.
Sprint: Claure Cuts Costs
One of the first things Claure did after taking the reins at Sprint was to start cutting costs. Sprint was spending a lot more than it should have been. This included cutting a number of discount programs that the company was running and not renewing its NASCAR sponsorship, which ran out in 2016. Claure didn't see much value in these programs, other than spending money that could be better invested elsewhere. Claure also cut a number of jobs at Sprint shortly after taking over, arguing that those employees aren't necessary any longer since Sprint was a much smaller company than it was about five years earlier.
Sprint needed to cut costs and cut them quick. The company was in a huge pile of debt that becomes due in just a few years. So it needed to be turned around and become profitable. When Claure took over, he said that Sprint would only need three years to turn around. Now that doesn't seem to be completely true, more than three years later. But Sprint is at least now making some money and adding customers to its network.
Sprint: RadioShack Takeover
In 2015, Sprint sought to purchase the existing RadioShack stores for nearly $160 million. RadioShack was in the middle of bankruptcy, but Sprint saw this as an opportunity to expand its retail presence. The thinking here was by opening more Sprint stores (that were co-branded with RadioShack), it could pick up more customers. Sprint picked up 1,435 stores from RadioShack, which would more than double its existing retail presence. The stores would adopt Sprint branding, and nearly a third of the retail space in each store would be full of Sprint's products and services. This move ultimately didn't work and Kensington Capital Holdings bought RadioShack in 2017.
Sprint: Talks with T-Mobile (Round 2)
After Donald Trump was elected as the next president of the United States, SoftBank CEO and Sprint Chairman Son met with the then-President-Elect at Trump Tower in New York City and said he would invest $50 billion in the US through SoftBank's Vision Fund. While this was seen as SoftBank bringing money to the US, it was really to set the seeds of attempting to merge T-Mobile. After Trump was sworn in as the 45th President of the United States, Sprint, SoftBank, T-Mobile and Deutsche Telekom began merger talks once again. These talks didn't lasted for nearly a year, having been ended in November of 2017. It was rumored that the big sticking point was the stake SoftBank would have in the combined company. Sprint and SoftBank began talking with Dish about a merger or acquisition at one point as well, which was widely interpreted as a good idea seeing as Dish does have a good amount of spectrum that it's not using - and needs to put to use in the next few years, or pay fees to the FCC for not doing so.
Sprint: T-Mobile Merger Talks (Round 3)
In early 2018, the four companies - Sprint, SoftBank, T-Mobile, and Deutsche Telekom - began talks once again, with them really heating up in April of 2018. By the end of that month, a deal was in place. With T-Mobile purchasing Sprint for nearly $26.5 billion in an all-stock offer. The deal does still need to be approved by regulators, however. And it's likely going to be a tough one to convince regulators to approve since T-Mobile will be eliminating one of its competitors, something its suitor AT&T unsuccessfully attempted doing seven years back.
Sprint & T-Mobile Announce Merger, To Become The "New T-Mobile"
On April 29, T-Mobile announced that the two companies would merge, with Sprint becoming part of the "new T-Mobile." Legere would remain the CEO of the combined entity, with Mike Sievert remaining the Chief Operating Officer but also becoming the President of the firm. Sprint's current chairman and SoftBank CEO Son and Sprint CEO Claure would be joining the board as part of the same move. Deutsche Telekom CEO and T-Mobile US chairman Tim Hottges will become the chairman of the board for the new company. T-Mobile says that other executives and management team members will be selected from both companies following the closing of the deal. Deutsche Telekom will own the majority of the new company, with 42-percent. SoftBank will hold 27-percent of the new entity, with the remaining 31-percent being publicly traded on the New York Stock Exchange.
It was a long and bumpy road for both companies to merge into one, and it took a few tries as well. But this was Son's original vision when his company purchased a majority stake in Sprint back in 2013. Son had planned to buy Sprint and then buy T-Mobile and merge the two, but regulators had different ideas. So his vision was delayed a bit, but pending approval, it is going to happen, even if it does end up costing him the control of the combined telecom giant, less he somehow ends up with a major stake in Deutsche Telekom as well.