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T-Mobile to Buy Sprint for $26.5B to Create US 5G PowerhouseT-Mobile to Buy Sprint for $26.5B to Create US 5G Powerhouse

The combined company will need every last bit of spectrum it has to succeed.

Dan Jones

April 30, 2018

4 Min Read
T-Mobile to Buy Sprint for $26.5B to Create US 5G Powerhouse

T-Mobile and Sprint finally came together Sunday to announce a $26.5 billion merger that company executives repeatedly claimed will create American jobs, increase broadband competition and cement the US as the leader in 5G.

John Legere, the boisterous CEO of T-Mobile US Inc. , will serve as the "new" T-Mobile leader. Sprint Corp. (NYSE: S) CEO Marcelo Claure will get a seat on the board. The new T-Mobile will be headquartered in Bellevue, Wash., with a second headquarters in Overland Park, Kan. The companies hope to close the deal no later than the first half of 2019.

The combined company would be the third-largest wireless operator in the US, behind AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ)

On a press and analyst call Sunday afternoon, Legere said that the merger is "happening for one reason, customers expect -- no demand -- innovation." He promised that customers will get a better network and lower prices out of the merger.

Perhaps with an eye toward US regulatory concerns, however, Legere stressed that the deal would create "thousands of American jobs." He praised the Trump administration's tax reform for helping to facilitate the deal and noted that the deal would help the US grab the lead in 5G while bringing broadband to rural communities across the country.

This merger, he argued later in the call, will help cement "America's rightful spot in the 5G evolution cycle," an important point given White House concern about China taking the lead in 5G, and the fact that the Trump administration cited that specific fear as one reason for blocking Broadcom from buying Qualcomm. (See Trump on 5G: It's a 'Gamechanger' and Trump Blocks Broadcom's Qualcomm Acquisition .)

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Combining the two networks will be a mammoth task, which the companies expect will take three years. The combined company will start with 110,000 cell towers and hope to end up with around 85,000 macro sites, with radios supporting both Sprint and T-Mobile frequencies. They jointly have less than 10,000 small cells now and expect to grow that to 50,000 over the three years from the anticipated close in 2019.

If approved, the deal would give the company a swathe of mid- and low-band spectrum for deploying 5G nationwide, as well as Sprint's 2.5GHz band in the US.

"Our millimeter wave holdings ... are 200MHz across a million PoPs," T-Mobile CTO Neville Ray said on the call, while adding that it would cost "$1.5 trillion" for the current big two operators to build out millimeter wave nationwide across the country because of the limited coverage range the technology provides. (See 5G & Millimeter Wave Band Challenges.)

"Never gonna happen," he declared.

"There's a lot of radio work that needs to happen to support the eventual migration path," Ray said. "But we're very confident we can break the back of it within three years, if not before."

The executives are pinning a lot of hope on a friendly regulatory environment that doesn't ask for spectrum -- or other concessions -- to approve the merger. "We need every ounce of spectrum," Ray said.

The goal is to deliver a nationwide mobile 5G network that provides an average speed of 450 Mbit/s over the air everywhere, "not just peak speeds," Legere said. The companies argue that will allow them to deliver broadband -- including TV -- anywhere, and take on the cable companies, not just its wireless competitors.

"We will bring all the latest technologies ... to the rural communities of America," Marcelo Claure claimed.

"T-Mobile cannot do the 5G strategy without Sprint, and Sprint cannot do it without T-Mobile," Claure said.

This is just the latest attempt by the two companies to merge: Talks most recently fell apart in November 2017.

"This has been Masa's plan since 2012," Claure said, referring to Softbank's CEO Masayoshi Son. "Last year, we never had a deal, we could never come to an agreement." (See Sprint, T-Mobile Merger Falls Apart (Again!).)

If the deal closes, Germany's Deutsche Telekom AG (NYSE: DT) will hold a 42% stake in the combined company, Japan's SoftBank Corp. a 27% stake, and the rest will be publicly held, Legere said.

— Dan Jones, Mobile Editor, Light Reading

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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