T-Mo/Sprint Merger To Lower Prices, Especially With 5G: Analyst

A merger of T-Mobile and Sprint would likely lead to lower prices for consumers despite directly taking out some competition from the market, Mobile Experts Principal Analyst Joe Madden wrote in a Tuesday column published by FierceWireless. While the number of major wireless carrier players is usually inversely proportional to the average revenue per user in any given market, consumers surrounded by more competition also tend to use much less mobile data on a monthly basis, the industry watcher said, citing the examples of populous European countries such as Germany and France as clear indicators that a high ARPU doesn't translate to a high cost per gigabyte asked from end users.

Fewer more powerful mobile service providers have access to vaster resources they can use for delivering better offerings such as unlimited plans, thus increasing the per-dollar value they provide to their customers in a significant manner, according to Mr. Madden. Increased revenues also lead to higher capital expenditures which fuel innovation, which is why high-ARPU markets such as Japan and South Korea are now on course to commercialize "true" 5G on a national scale before Europe despite having only three major players each and less incentive to compete on the surface, the analyst said as part of his argument in favor of T-Mobile's proposed purchase of Sprint valued at approximately $25.6 billion. With 5G being widely expected to lower the cost of a gigabyte of wireless data to a significant degree, the difference between that metric and ARPU is bound to become even larger, which is part of the reason why Washington's regulators should approve the proposed consolidation, the industry watcher concluded.

Mr. Madden hasn't reflected on the reasons behind ARPU's effect on the average cost of a wireless gigabyte, nor did he assume that some consumers may not want to opt for top plans or be able to afford them in the first place, with the latter being the main argument against the tie-up; a number of advocacy groups and one high-profile wireless industry veteran recently spoke out against the merger proposal, claiming it will hit the prepaid segment — and hence America's poorest families — the hardest. T-Mobile and Sprint are hoping to receive a regulatory blessing to consolidate in the first half of 2019, claiming a combined company will be able to deploy 5G services throughout the country in a much more effective manner than either would individually.

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