T-Mobile and Sprint will merge in a deal that creates a bigger No. 3 wireless carrier in the United States, but may signal an end to the era of aggressive competition for subscribers.
The merger, which is all-stock, was announced on Sunday following years of meetings held at different times, but never reaching an agreement until now. It will create a wireless company named T-Mobile and values Sprint a more than $59 billion and the combined entity at over $146 billion, which includes debt. Excluding debt this deal values Sprint at approximately $26 billion.
The two companies said the merger, if approved by federal regulators means lower prices for consumers, better innovation, more jobs as well as better overall wireless service, especially across the rural areas of the U.S.
The deal was also touted as a way of best positioning the two companies to compete in the upcoming 5G race to land faster wireless internet. However, critics of the deal worry the merger is going to curb overall competition and result in people losing their jobs.
The new entity, which would have over 90 million subscribers of wireless services, still is third behind the two top carriers, with Verizon holding the lead with 116 million and AT&T at 93 million subscribers.
Marcelo Claure the CEO at Sprint said it was simple, both companies are in need of one another and the reason the merger will be successful is T-Mobile cannot do its 5G without having Sprint and Sprint is not able to accomplish the same without being together with Sprint.
A spokesperson from AT&T did not comment when asked about the merger, nor did a spokesperson for Verizon.
Executives from the two companies said the deal would result in new jobs numbering the thousands right away, with a potential for tens of thousands to be added later. The plan for the merged company is invest as much as $40 billion its new business and network during the first three years, which is a huge outlay of capital that could help job growth in other related sectors as well.
However, analysts said that job cuts were inevitable with redundancies being obvious between the two companies once they become one. These could reach the tens of thousands and the heaviest brunt could be felt by call centers. Together the two companies have over 80,000 employees.
Layoffs could become the biggest opposition the merger received.