Boost Mobile founder and former CEO Peter Adderton raised concerns about T-Mobile and Sprint's proposed merger earlier this week, having described the move as detrimental to the MVNO business model and prepaid subscribers in general. The consolidation would see more than 30 million prepaid customers merged, with all brands owned by T-Mobile and Sprint being planned for convergence. Sprint's Boost Mobile and Virgin Mobile USA and T-Mobile's MetroPCS hold 40-percent of the prepaid market in the United States, with their potential tie-up eliminating competition and hence being likely to hurt consumers, Mr. Adderton believes.
The three prepaid brands are presently able to offer the lowest rates in the industry "simply because they’re competing with each other so aggressively for prepaid customers," the industry veteran said, pointing to attractive promotions such as Boost Mobile's offer of two months of free service to all MetroPCS switchers which the latter MVNO mirrored earlier this year as an example of such consumer-friendly practices. Offers like these will be among the first items on the chopping block if T-Mobile and Sprint are able to merge and the MVNOs in question end up serving "the same master," Mr. Adderton said. The veteran executive asserted that convergence goes against the very reason Boost Mobile came to be - offering affordable and high-quality service to less prosperous consumers.
MVNOs may also have a harder time negotiating contracts with national carriers once there's fewer of them on the market to choose from, especially since Sprint and T-Mobile are "a dominant force" in the prepaid segment, according to the Boost Mobile founder. Many of Mr. Adderton's remarks have already been voiced by consumer advocacy groups which expect prepaid prices to rise in the aftermath of the tie-up. T-Mobile and Sprint are claiming the consolidation will create more competition than it eliminates, pointing to 5G as one segment in which the duo will be able to compete more aggressively combined. The two carriers are hoping to have their merger approved in the first half of 2019, though many analysts are describing that timeline as optimistic given the intense scrutiny the deal is likely to attract from the FCC, FTC, and the DOJ.