Key discussion test T-Mobile-Sprint merger: Key discussion fusion test T-Mobile-Sprint is about competition

 T-Mobile US and Sprint continue to advocate their proposed merger of a coalition of state prosecutors asking to block the agreement. This is an unusual challenge, as federal regulators have already supported the combination of EE's third and fourth largest wireless providers. UU

T-Mobile (ticker: TMUS) and Sprint (S) have agreed several concessions to be won by regulators in the Justice Department and the Federal Communications Commission during the summer. They have agreed to sell the wireless spectrum licenses, cell towers and the prepaid brand Boost Mobile to Sprint to the satellite television provider Dish Network (DISH), which already has a certain spectrum and will begin to build its own 5G network next. generation.

The goal is to provide the Dish with the tools to become a viable competing chamber for the new T-Mobile, AT&T (T) and Verizon Communications (VZ), but 14 state attorneys general argue that the merger it will reduce competition in the market and lead to higher prices for consumers. State attorneys have presented evidence, including company internal documents and emails, showing that executives saw a decrease in competitive strength in the U.S. wireless industry. UU As one of the goals of the merger.

Key discussion test T-Mobile-Sprint merger

In defense, T-Mobile's CEO John Legere testified that a merger with Sprint would give the new T-Mobile more scalability, network efficiency, spectrum licenses and other resources, meaning it could innovate. faster and lower prices to bear the cost. Current industry leaders, Verizon and AT&T, are better than T-Mobile or Sprint independently.

Sprint executives have emphasized this argument by witnessing the plight of their business. The company has lagged behind the industry in terms of subscriber growth and is losing money. It also has a heavy debt burden on its market value, which puts it at a significant disadvantage for capital-intensive 5G network deployment. A Sprint vice president even stated last week that the company "will cease to be viable in the next two years."

However, the plaintiffs compared the situation with T-Mobile in 2012, when it had similar difficulties. But it soon succeeded, and has been the biggest success story in the US wireless industry ever since. UU T-Mobile has outperformed competitors in terms of subscribers, earnings and sales growth for several years, without having to merge with one competitor.

The companies argue that the structured deal would result in more competition than if Sprint continued on its own and delayed the transition to next-generation 5G networks.

"The big picture is companies have been trying to convince the judge that their choice is simply to ask what's best for market competition: a future with a larger, richer spectrum T-Mobile and Dish. as [a mobile virtual network operator] and eventually as a facility-based provider, or a future in which Sprint is independent, "said Blair Levin, a U.S. policy and regulations analyst at New Street Research, in a report on Wednesday.

A mobile virtual network operator, or MVNO, is a company that sells wireless services but does not own the network in which it operates. AT&T, Verizon, T-Mobile and Sprint each have their nationwide wireless network infrastructure and have wholesale agreements with other companies to fill the excess capacity. Alphabet's Google Fi (GOOGL) uses EE's Sprint, T-Mobile, and Cellular networks. UU (USM), while Comcast's Xfinity Mobile (CMCSA) operates in Verizon.

Under the terms of the agreement with federal regulators, Dish could also use the new T-Mobile network as MVNO for seven years. In the meantime, Dish would roll out its own fiber optic cable, cell towers and antennas and begin moving customers to its network. The potential conflict of interest filed by this agreement also arose at the trial this week. Dish and the new T-Mobile would compete for customers, but Dish would depend entirely on the new T-Mobile network for years.

In a testimony on Tuesday and Wednesday, Dish founder and CEO Charlie Ergen provided some additional details on his company's wireless plans should the merger be approved. The company plans to have 10,000 cell towers operating by 2022, covering approximately 50% of the EE population. UU Ergen said Dish estimates the cost of this at $ 8 billion to $ 10 billion, and that his company could use $ 10 billion in funding from three banks to finance its 5G construction.

Ergen also hinted at discussions with potential partners that Dish could work with. More detailed testimony about these potential partners occurred in a confidential session Wednesday, but a defense lawyer referred to them as "some of the most successful companies on the planet." Some analysts have speculated that Amazon.com (AMZN) or Alphabet may be interested.

But Dish, however, would be entering the market considerably further behind where Sprint is.