T-Mobile merges with Sprint: Can you slow down their 5G anxiety?

T-Mobile merges with Sprint: Can you slow down their 5G anxiety?

According to media reports, US telecom operators T-Mobile and Sprint announced a merger of $26.5 billion in all-stock transactions, and the US Department of Justice finally approved the merger.

According to CNBC, Sprint will divest the prepaid mobile phone business of Boost Mobile, Virgin Mobile and Sprint. Sprint and T-Mobile will strip some of the wireless spectrum for the Dish Network and provide the company with at least 20,000 mobile sites and hundreds of retail stores. In addition, Dish needs to be able to access the combined new corporate network for the next seven years.

15G anxiety, dramatic merger of T-Mobile and Sprint

In the past, in order to prevent industrial giants from forming monopoly industrial interest alliances through large-scale mergers and acquisitions, infringing on consumer interests, in the past, US justice has opposed many large enterprises, especially telecom operators.

For example, AT&T's attempts to acquire Time Warner and T-Mobile and T-Mobile's attempts to sell to Sprint have not been approved. Since 2015, T-Mobile and Sprint have already heard rumors of mergers. In mid-2017, the two sides talked about collapse again.

This time, T-Mobile and Sprint were successfully merged. The reason for the ceremony was the Sino-US 5G competition. The CEO of T-Mobile announced that the United States has lagged behind China in the development of 5G. This merger will benefit the United States. Competition with China in the 5G field.

It can be said that T-Mobile and Sprint just hit the shortcomings and anxiety of the US telecommunications infrastructure, and this merger was also adopted dramatically.

The major shareholders of T-Mobile and Sprint are Deutsche Telekom and Japan Softbank Group. Among them, Deutsche Telekom holds about 62.3% of T-Mobile, while Softbank holds about 83% of Sprint. An important reason why the two companies have been unable to talk about it before is that Softbank believes that the merger agreement is too T-Mobile. After the merger, Sprint will lose control of the US market.

The benefits after the merger are obvious. On the one hand, from the perspective of transaction structure, the two sides are more like mergers than acquisitions, that is, not one annexation of another, but a disguised form of a new company that integrates the assets of T-Mobile and Sprint. After the merger, T-Mobile and Sprint will become the third and fourth largest operators in the United States. When they merge, they will surpass AT&T to become the second largest operator in the United States.

Second, the new company after the merger will have more network spectrum, including T-Mobile's 600 MHz and 700 MHz and Sprint's 800 MHz and 2.5 GHz, which is clearly beneficial to the coverage of its 5G network development and new network deployment. And planning.

But this may have set a bad precedent. In the past, the US Department of Justice believed that large-scale mergers and acquisitions would significantly weaken market competition and curb innovation, which may lead consumers to pay higher fees. However, from the current case, the merger of the two sides has won the approval of the US Department of Justice, although the transaction still faces antitrust lawsuits from the 13 state attorneys of the United States and the first Washington district in Washington.

However, due to antitrust considerations, the US Department of Justice requires T-Mobile and Sprint to divest some assets, including Sprint's Boost Mobile, Virgin Mobile and other prepaid phone services, as well as some of Sprint's wireless spectrum for $5 billion. To the satellite TV giant Dish Network.

That is to say, after the merger, the two sides have to create a new competitor in their own network to divide the cake of the telecom operators, because after the merger, the three major US operators have already won 95% of the US market. Share.

In other words, the current merger of the two has actually brought troubles and hidden dangers to the anti-monopoly review in the US market. As some people in the industry have mentioned, if large-scale mergers and acquisitions in the United States want to persuade the US anti-monopoly review, the reason for competing with China in the future can almost become a universal key.

2T-Mobile and Sprint merge, report group heating to survive

In fact, from the current situation, whether T-Mobile and Sprint are to be merged is actually the issue of survival and death of both parties. On the one hand, the big environment is that the communication industry is in a cold winter, the 5G era is coming, and T-Mobile and Sprint, which are not superior in strength, have no advantage in the competition of the first two operators in the United States. The US carrier market is easy to lead to the strong. The pattern of Hengqiang.

In addition, the US 5G uses millimeter waves, T-Mobile and Sprint face a steep increase in cost, only the merger can report the group to warm, and even have the hope of survival.

The combined company will have more than 80 million users, the overall enterprise value is about 160 billion US dollars, the market structure changes: the new T-Mobile after the merger has strength and the top two giants of the US telecommunications industry Verizon (Verizon) Fighting with AT&T.

The combined New T-Mobile will have the opportunity to further promote market competition and reduce market tariffs if a lower cost, larger scale 5G network is built.

Therefore, the reason why T-Mobile and Sprint have passed the anti-monopoly review in the US, I think there are three reasons:

First, their mergers and acquisitions can ensure the stability of the communications job market.

Second, their mergers and acquisitions will not only create a monopoly, but will avoid the emergence of market monopolies. Because for T-Mobile and Sprint, the two benefits, the score is two injuries.

In the 5G era, if they are alone, they will not have enough strength to compete with the second largest operator in the United States. If they follow the current trend of the pattern, they will lead to a monopoly pattern in the former and the first two. In order to make the US telecom market structure more balanced.

Third, the anxiety that 5G leads no longer is the catalyst for the merger of T and S. In the United States, AT&T and Verizon may not be able to lead the US 5G to take the lead.

The United States needs to introduce more high-quality players on the 5G track. This is actually a horse racing mechanism similar to Tencent. Multiple teams PK, the competitive effect will stimulate the market to generate more innovation and better product experience. The market vitality is not as strong as the three. In the United States, outside of AT&T and Verizon, there is clearly a need for a more viable competitor.

3 US 5G problem, not a carrier merger can solve

Regardless of China and the United States, 5G may face the problem of unequal cost input and output and profitability. First, the operator's 5G construction cost is high, and second, the terminal price is high, the user's replacement power is not strong, and the short-term popularity is difficult. 5G investment is too large, facing the dilemma of wireless extension of cost recovery cycle, only to quickly complete the scale of user group coverage, it can reduce operating costs to achieve a positive cycle of input and output.

In the moment, the US 5G problem is not solved by the merger of the two major operators.

One is that the US telecommunications industry has a clear recession. In the 5G era, there is no telecommunications equipment supplier in the United States that can compete with Nokia, Ericsson, and Huawei. The wireless communications company Cisco used to be a well-known telecommunications equipment provider, but later Its business is increasingly turning to software and network security and cloud services rather than building its own core communications network.

In a nutshell, in the United States, no company has been able to manufacture high-quality 5G telecommunications equipment.

Operators such as AT&T, Verizon and Sprint still need to rely on cooperation with Nokia, Ericsson and Samsung to provide telecom equipment.

Bill Huang, a Chinese-American telecom industry expert, once said that the United States has long led the telecommunications industry, but in the past 20 years, the United States has changed from a leader in the telecommunications industry to almost completely out of the telecommunications equipment manufacturing industry. To date, no US company has been able to manufacture the equipment needed to build a new generation of wireless networks.

The second is that the US fiber infrastructure is seriously lacking, and 5G has to achieve ultra-high-speed data transmission, which is inseparable from the strong support of fiber optic cable. The 5G frequency band is much higher than 3G and 4G, and the coverage is smaller, requiring a large number of small base stations.

AT&T previously estimated that it would take ten years to complete a 5G network deployment. Earlier, AT&T engineers said that the US 5G network would mean the most expensive, complex and cobweb-intensive fiber network in history.

Therefore, the US fiber infrastructure is relatively lacking. At this time, it means that it still needs to go through a long period of infrastructure construction and invest huge manpower, material and capital costs.

The third is that it needs to cooperate with local governments and lay out fiber-optic pipelines, which will seriously slow down the progress of 5G construction, especially compared with fiber-optic cables. The construction and price of fiber-optic pipelines will also slow down the construction of 5G networks.

Compared with the United States, China has been quietly and strongly deployed on fiber optic infrastructure in the past 10 years. Currently, it has occupied more than 50% of the world's fiber optic cable usage. In China, the nationwide fiber optic network has basically taken shape.

China has covered almost all of the high-quality bands from low-frequency, intermediate-frequency to high-frequency, and the 5G band is allocated.

The US and European operators are mainly focusing on 28G millimeter waves. On the one hand, the use of frequency bands requires payment to the government for billions of dollars. On the other hand, millimeter wave technology needs to pass devices similar to repeaters. As an intermediate node to extend the signal, it will lead to cost increase and network propagation speed are affected.

In contrast, due to the relatively complete infrastructure construction, China's progress in the construction of 5G networks may be faster.

Previous data showed that China will complete the full coverage of 5G networks in 2023, and its share in the 5G standard has reached 30%, and has begun to lead in technologies such as large-scale antennas, ultra-dense networking, and TDD system design. The number is already 10 times that of the United States.

Therefore, based on the 5G commercialization and the risk of falling behind, the merger of T-Mobile and Sprint is more like a 5G strategy in the United States.

After all, T-Mobile and Sprint promised and emphasized their coverage of rural networks, narrowing the gap between rural and urban 5G network coverage (in fact, similar to the villages that the three major operators in the past played), and promised to deploy within three years. 5G services should cover 97% of the US population and achieve 99% coverage within six years, which is in line with the 5G strategy that the United States needs to do.

Therefore, in this sense, the merger of T-Mobile and Sprint may stimulate the squid effect, which will help promote the construction progress and scale of the US 5G network and reduce the market tariff.

But in summary, it can concentrate resources and funds to build a large-scale 5G network, but the decline of the US telecommunications industry itself has become an established fact, infrastructure construction has lagged behind, and it is not realistic to catch up in a short time. The combination is similar to the effect of a dose of sedative, which temporarily relieves 5G anxiety, but it is not an antidote to the root cause of the US 5G problem.