T-Mobile Shareholders Vote For Sprint Merger Amid Mounting Opposition

T Mobile Logo Oct 31 18 AH

T-Mobile shareholders on Tuesday approved the company's plan to merge with Sprint, absorbing its smaller rival with the goal of doing a better job at competing with AT&T and Verizon. The move comes amid mounting opposition to the deal, most notably from the Communications Workers America (CWA), the largest union of wireless employees in the country. The vote is still significant as it brings T-Mobile closer to realizing its consolidation plans as it essentially signals the company is all set to combine with Sprint as far as its side of things is concerned.

T-Mobile Chief Executive Officer John Legere used the announcement of the voting results as yet another opportunity to reiterate the bulk of the firm's merger argument, claiming the consolidation won't just improve competitiveness in the stateside wireless industry but also create jobs and ensure the United States wins the global 5G race. As part of the same communication, the industry veteran repeated T-Mobile's commitment to fixed wireless access solution, vowing the combined company will provide a broadband alternative to consumers shortly following its establishment. Minority shareholders weren't asked for input on the consolidation as the move was approved by Deutsche Telekom, T-Mobile's parent company that holds around 63.5-percent of its stock. No other approvals on T-Mobile's side are required for the deal to go through. While the merger remains subject to regulatory approvals, T-Mobile and Sprint are still hoping the effort will be included by the end of the first half of 2019.

Background: Earlier this week, CWA publicized an in-depth argument against the mega-merger, delivering yet another pushback against an all-stock deal valued at some $26.5 billion. The union believes the consolidation will eliminate 30,000 retail positions across the country, claiming California, Texas, and Florida will be hit the hardest, losing over 2,000 jobs each. The two telecom giants remain adamant that while some positions may end up being cut as a result of the ordeal, the merger will ultimately amount to a net positive job gain from day one. Employees shouldn't fear the "scary" synergies stemming from the consolidation, Mr. Legere argued earlier this month. Should the merger be approved within the planned timeline, the new T-Mobile will employ 3,625 more people than the two companies currently do by the end of 2019, the telecom juggernauts claimed. By 2023, the combined company will have nearly 25,000 more employees compared to right now, according to the same merger pitch.


Many industry watchers maintain the deal cannot be framed as a win for consumers no matter the perspective as the main purpose of traditional big-business consolidations isn't to help consumers but shareholders. T-Mobile and Sprint hit back at those claims by arguing their consolidation is anything but conventional and isn't a move made out of desperation as such large-scale tie-ups often are. Some analysts are skeptical about those claims as Sprint is still widely seen as being overleveraged even as it started turning things around in recent quarters, whereas T-Mobile is believed to be in dire need of its smaller rival's spectrum portfolio.

The duo's claims about the merger being their only viable road to swift and sustainable 5G commercialization has also been met with reservations as both claimed they'll be capable of delivering nationwide 5G coverage by 2020 on their own. Even former FCC Chairman Tom Wheeler criticized that change of heart earlier this year, wondering whether the two firms were lying about their technical abilities to deploy 5G or were incompetent while trying to estimate the thereof.

Some well-known industry veterans such as Boost Mobile founder Peter Adderton recently argued about the merger also essentially gutting any semblance of competition in the prepaid market segment, thus hurting America's poorest consumers, primarily students and elderly. T-Mobile responded to those claims by rebranding MetroPCS into Metro by T-Mobile and equipping the carrier with more aggressive plans, in addition to vowing neither it nor Sprint will be killing off any one of their prepaid units. While nothing is legally compelling them to do so, that would change if that promise ends up being made to federal regulators. The extent of the potential job cuts the merger could prompt is still unclear and CWA's claim of 30,000 positions being eliminated by the move has yet to be corroborated by another party.

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Much like Sprint and T-Mobile did a 180 on their 5G plans after agreeing to merge, so did T-Mobile went back on its views on fixed wireless access technologies; it mocked them and Verizon's efforts to commercialize them several months back but is now adamant to launch them as well after combining with Sprint. No firm details on the matter have yet been provided by the company so it's unclear whether the FWA service will be of the 5G variety like Verizon's one but even if that's the case, it will be based on 3GPP's standards and not a proprietary specification.

Impact: T-Mobile and Sprint have mostly been making all the right moves in getting their merger proposal approved up until now; while the consolidation is still far from certain, the two companies addressed the vast majority of the largest concerns publicly voiced about the deal and are seemingly on course to getting it approved in some shape or form. The biggest question is whether the tie-up will be allowed to go through without major concessions, particularly those related to the prepaid market. Due to an overall lack of national competitors in the prepaid segment, T-Mobile, Sprint, or both could feasibly be forced to divest some of their units like Metro and Boost Mobile, or at least be asked to spin them off into independent entities. It's still unclear whether they would be prepared to do so but given how they're pressed for time if they want to launch a nationwide 5G service by 2020, they may be willing to play ball with the DOJ and FCC should either regulator demand such a course of action instead of dragging the matter to court like AT&T did with its Time Warner purchase. Ultimately, the mid-2019 approval goal is still rather optimistic and the tie-up may not be greenlit until much later in the year.