A T-Mobile-Sprint Merger Would Help AT&T and Verizon

T-Mobile (NYSE: TMUS  ) and Sprint (NYSE: S  ) are reportedly moving closer to a merger, which would leave three major U.S. wireless operators from the current four. The idea is that a stronger T-Mobile/Sprint could compete on a more even playing field with AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) , who have larger networks. 

But don't go shedding tears for AT&T and Verizon. If the merger goes through, it would leave only three major players in the U.S. wireless business and an industry with a small number of large players often enjoys comfortable margins and less cutthroat competition. Think of the cereal business, major beer producers, or big oil, who all enjoy high margins and plentiful profits along with little disruptive competition. 

Today, Sprint and T-Mobile are scrappy underdogs who will forego price to attract customers, leading to price wars and lower margins. But if a merger happens, those days are likely over, which will be advantageous to AT&T and Verizon. Specialist Travis Hoium gives his thoughts in the video below. 

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  • Report this Comment On June 10, 2014, at 10:47 PM, LowellUkulele wrote:

    The author owns AT&T and Verizon stock, and is trying to convince us that a T-Mobile/Sprint merger is good for the behemoths of the wireless industry. He's wrong because Sprint and T-Mobile can't continue to be price leaders. Neither company is profitable, so long-term viability in this environment is impossible. A stronger #3 carrier will be able to match network spending and quality, and have more leverage when purchasing equipment, which will lead to long-term viability. That is the only way that AT&T and Verizon will be challenged by a carrier delivering lower prices in the long term.

  • Report this Comment On June 11, 2014, at 8:30 AM, meso wrote:

    Are you kidding me? If you are ATT and Verizon you are praying this deal does not go through. TMUS can only buy business for so long and Sprint is just lame. Son has said he is going to start a pricing war when he has the scale to do battle. How is this bad for the consumer?

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