(ElectronicsWeekly)– Yesterday Sprint and T-Mobile, the third and fourth largest US mobile networks announced a $26 billion merger.
Before the merger, Softbank owned 85% of Sprint and T-Mobile owned two thirds of T-Mobile.
Under the merger deal, Deutsche Telekom gets a 42% share of the combined companies and the right to appoint nine out of a fourteen director board. Softbank will own 27% of the combined company.
With $147 billion of debt, Softbank was not in a position to take control.
Masayoshi Son, current SoftBank Group Chairman and CEO, and Marcelo Claure, current Chief Executive Officer of Sprint, will serve on the board of the new company.
The combined company will be called T-Mobile, and T-Mobile’s current CEO John Legere will run it.
“This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience – and do it all so much faster than either company could on its own,” says Legere. “As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf.”
What the US competition regulator will say to a merger between two of the participants in a four horse race (AT&T, Verizon, T-Mobile & Sprint) is unknown.
“This isn’t a case of going from 4 to 3 wireless companies – there are now at least 7 or 8 big competitors in this converging market,” says Legere, “and in 5G, we’ll go from 0 to 1. Only the New T-Mobile will have the capacity to deliver real, nationwide 5G.”
However a proposed AT&T-T-Mobile merger was scuppered by the US regulator seven years ago.
The argument may revolve around the cost of installing 5G. Both companies have said they need to combine to be able to afford to do it. They have pledged to invest $40 billlion in the network in the three years folliwing the nerger.
The costs of 5G are so great, and the US is so concerned about falling behind Europe and Asia on 5G, that the White House has already proposed a plan to have Uncle Sam build a national 5G network and lease it out to operators.
The plan has not found much favour with operators.