Sprint Corp (NYSE:S) and T-Mobile US Inc (NASDAQ:TMUS) are trying their luck to combine after their failed merger four years ago. The merger plan is to create a large conglomerate and rival other wireless providers like AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:V).
Following the merger, both the firms can pool the spending on R&D and wireless spectrum to expedite development of next generation high speed wireless communications 5G services and roll out quickly to the benefit of customers.
Following this merger talk, the shares of T-Mobile has dropped by 6.2% because the investors fear that regulators will block the deal. The shares of Sprint has also dropped by 14% a day after the merger talk. It is the worst decline for Sprint in a year.
There is a substance in the investors fear since the Federal Communications Commission and the US Department of Justice have stopped the previous merger attempt of Sprint and T-Mobile four years ago on the ground that shrinking of the national carriers from four to three would harm the competition. However, T-Mobile and Sprint are of the view that a lot has been changed since then.
The cable companies Charter Communications Inc (NASDAQ:CHTR) and Comcast Corporation (NASDAQ:CMCSA) are foraying into the wireless space by taking the space on lease from Verizon instead of building their own. It has created more competition in the wireless space.
Countries such as China and South Korea are racing ahead to establish a footprint in 5G. As a result, the telecommunication players are urging the US to encourage developing better wireless carriers in America.
Mr. John Legere, CEO of T-Mobile said they will drag other players to create a more advanced networks 5G in the US.
However, allowing the merger will create a more burden on the customers. With reduced competition, the players will increase the prices of the services.
The smaller players among the four players in other countries have lowered the prices to garner more customers. But that perspective is now gone. The reduction in a number of players allows increasing the revenues/ profits by enhancing the prices. Therefore, it casts a negative impact on the customers.