Sprint and T-Mobile Make Their Case for a 3-Player Wireless Market

This might not be the first time T-Mobile (TMUS 0.57%) and Sprint (S) have tried to tie the knot, but after nearly four years of rumors and speculation, an official agreement is finally on the table.

In this episode of Industry Focus: Consumer Goods, host Vincent Shen and Motley Fool contributor Dan Kline break down the $26 billion merger before considering its implications for investors, consumers, and regulators.

A full transcript follows the video.

This video was recorded on May 1, 2018.

Vincent Shen: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. It's Tuesday, May 1st, and I'm your host, Vincent Shen.

As the host of an investing and business-focused podcast, I typically have lots of options when it comes to the topics that we discuss on this show. It can be quarterly earnings, it can be a deep dive on a specific company, a high-level discussion on investing best practices and tools. 

But over the weekend, the business world served up a story, and it's the kind of news that pretty much demands our attention. Today, we're going to spend some time talking about Sprint and T-Mobile, which have agreed to a $26 billion merger that will put them in the ring with regulators for the second time in less than a decade. Joining me today inside the Fool HQ studio to discuss the deal is Motley Fool contributor, Dan Kline. Great to have you back, Dan!

Dan Kline: Thanks, Vince! So we've been talking, I'd say, for the past two or three years -- we usually bounce back and forth a list. It's not always obvious what the show should be about. And I would say, almost every one of those has ended "unless T-Mobile and Sprint agree to merge." It's become almost like a running joke in terms of, "This is going to happen at some point, so it's our backup show." So it's almost nice to just no longer have to think about it.

Shen: Yes. To have a deal on the table, it's really nice for them to officially announce something, and something that we can really deep dive on, provide a lot of specifics in terms of what the combined entity will look like, some of the financials, and some of the arguments that Legere and his crew essentially make about why this deal makes sense. But I have to imagine that, when you first saw this news, your ears really perked up, because you messaged me over the weekend, and it was kind of a surprise for them to announce it early on Sunday.

Kline: I literally had made a note to ask you and our various bosses about whether I should write the story in case it happens, so we'd have it ready to go. As I was making a note to do that, I saw it come across the transom and of course realized, "Oh God, it's the weekend, we don't have anything set up to deal with this in terms of stories." Look, I thought there were a lot of reasons that this still might not happen. We'll get into some of the regulatory concerns. But I really thought ego was going to stop this deal from happening.

Shen: Yeah, absolutely. And that did come up a few months ago, and we'll get into that. Let's take a few minutes here to just go over the history of merger attempts between the two companies before we get into the details of their recent announcement. Dan, please feel free to chime in with extra details as we walk through this saga. 

After that, just so listeners know what to expect, we'll look at how the two companies are packaging and marketing this deal to make it look attractive to consumers, investors, and regulators. And then, to wrap up, we'll share some of our final thoughts on the merger and some of the precedents that we've seen in terms of the regulatory environment.

So, if we rewind, it's 2014. Sprint and T-Mobile are the No. 3 and No. 4 wireless carriers, respectively. Masayoshi Son, he's the head of the Japanese conglomerate SoftBank (SFTB.Y 0.93%), and they've only recently, I think in the past year or so, acquired a majority ownership stake in Sprint. Masayoshi Son has big hopes of shaking up the U.S. wireless industry.

Kline: And at the time, T-Mobile was the lost cause.

Shen: Yes, exactly. On the flip side, Deutsche Telekom (DTEGY 0.09%), the parent of T-Mobile, they're looking to sell off the U.S. business. That year, Sprint announces a $30 billion-plus deal to take over T-Mobile and to present a more formidable third place challenger to Verizon (VZ -0.53%) and AT&T (T 1.88%). That theme, as we'll see with the latest deal announcement, does not change.

But those plans are ultimately derailed when regulators step in with very, very strong objections to the deal, and SoftBank is essentially forced to accept that they won't be able to overcome the antitrust challenges. Deal goes away.

Kline: It wasn't theoretical. It wasn't: "We might oppose this," or "There might be major conditions." Basically, the Obama administration had made it very clear that anything that took the industry from four players to three players wasn't going to fly.

Shen: Exactly. I'll note here, in terms of some of the players, that John Legere had already been the CEO at T-Mobile for over a year during those 2014 deal discussions, but at Sprint, soon after it gave up on that merger because of the objections from President Obama's administration, Marcelo Claure took over soon after that as CEO. And both Legere and Claure serve in those roles today.

Fast forward three years -- now, it's late 2017. We had a show where we talked about this. Again, the two companies are doing their little dance negotiating a merger. This time, though, there's been a reversal of those original 2014 deal talks, because T-Mobile is now in a much stronger bargaining position, because in just that approximately three, four-year time period, T-Mobile has enjoyed steady profitability growth, they've added, I think, almost 20 million subscriber additions, and that put it in the No. 3 position.

Kline: A million customers a quarter for over four years at this point.

Shen: Very solid string of results for them. Meanwhile, Sprint, they're struggling still. They've fallen to No. 4. But the company is starting to bounce back. They've implemented some pretty strong cost-cutting initiatives. They're putting out much more aggressive plan offerings to attract subscribers.

Kline: They sort of took a page out of the T-Mobile playbook. They did a couple of interesting things. Yes, they heavily discounted as a way to get people to switch. And they moved to a marketing campaign with Paul, the former Verizon "Can you hear me now?" guy. And their entire promotion basically said, "Yes, we have the worst network, but all networks are pretty good, so ours is good enough." Which is actually mostly true, as a former Sprint customer, so it was kind of a smart tactic. And you know Dylan Lewis, another one of the IF hosts, is with Sprint now, because he got offered a plan that was something like $1 a month. I might be overstating it. So Sprint was super aggressive in getting you to sign up with the idea that you'd get it and you'd be like, "OK, this is good enough. It's still cheaper when I'm not on the special offer, I'll stick around."

Shen: And correct me if I'm wrong, they were also one of the early providers to really push the truly unlimited plans that have kind of become standard now across the major four carriers.

Kline: Sprint and T-Mobile were certainly the first. T-Mobile was the first to go all unlimited, but Sprint has always had it. It was a reason I was a Sprint customer for so long. Not that I even use that much data, I just didn't want to have to think about it across my wife and my son and myself. So yeah, they were absolutely aggressive, and they did stabilize and move back to a growth position. It was just a very untenable position when you looked at long-term investment.

Shen: Yeah. So management at both companies right now has to be feeling more optimistic about their odds with antitrust regulators under President Trump's Administration. But back in 2017, in November, those discussions also ended up falling apart.

We covered those developments in detail on an Industry Focus episode around that time. In that case, the core disagreement was actually among the companies themselves and their management teams. This is what you mentioned, in terms of some of the ego, where Masayoshi Son and SoftBank were unwilling to give up strategic control of the combined entity, given that they saw a very long-term opportunity for wireless companies due to the Internet of Things and the ongoing need for connection between various devices, and a lot of potential financial opportunity there, and they were leery of giving that up.

Kline: They wanted control, but it's important to note, they lost all leverage in terms of being able to force control. They were the less successful company. And I'll give Marcelo Claure all the credit in the world, but no one is picking him over John Legere when you have to take on AT&T and Verizon. Legere literally wrote the playbook for this. So you weren't going to have a situation where SoftBank was going to be in charge. 

The negative of that for SoftBank is, you have all of this wireless spectrum and this stuff being used right now to deliver telephone service that has, in theory, the ability to do, as you mentioned, Internet of Things, cable, who knows what else. And that's something SoftBank has pledged to spend, I want to say, $100 billion in the U.S. in the next five or six years on. So probably, as part of this, there's some quiet agreement to work, at least discuss, those plans.

But, this deal actually happened, and the question was asked in the call between the two, when actually, Marcelo Claure and John Legere brought this back, they were talking about working together on 5G or possibly the roaming deal that's part of this in the interim phase, where Sprint customers can roam on the T-Mobile network. As those discussions started happening between these two usually adversarial CEOs, they came back to the idea of, "This makes no sense, we should merge."

Shen: Yes. So we have all that buildup. There's an actual deal on the table to dissect now. This was another instance where there were a lot of rumors. So they've been swirling since early April that the two companies were back at the negotiating table, and then they made their official announcement on April 29th, this past Sunday. 

It's an all-stock deal with Sprint shareholders, for each share that they own, getting 0.10256 shares of T-Mobile. Using the closing prices from last Friday, Sprint's stock was trading at $6.50 per share, while the exchange for T-Mobile stock was valued about $6.62. That might seem like a really narrow range with Sprint shareholders getting not even a 2% buyout premium. But as I mentioned, because these discussions have essentially been in the headlines since April 10th, if you look prior to that news, Sprint's stock was trading at only $5.14 per share. So based on that price, the premium is actually close to 30%, much more robust. It's better, but it's not much consolation for Sprint investors, because the stock was trading at almost $9 this time last year.

Kline: It's an all-stock deal, so it's not really a buyout of the stockholders. It's more selling them on the promise of the new company. 

Shen: Sure. So at that $6.62 exchange value, Sprint comes out with a value of about $26.5 billion. You add the company's $33 billion of net debt, total enterprise value for the company is almost $60 billion. 

Let's talk a little bit more about the combined entity now, because it's pretty fascinating. The "New T-Mobile", as they refer to it in the press release, will keep the T-Mobile name and also keep the TMUS ticker. The enterprise value will be close to $150 billion, $75 billion of annual revenue, around 100 million subscribers, I believe, and 200,000 employees, and a very close competitor now to AT&T and Verizon.

Kline: That's the big thing. You could say T-Mobile was No. 3. You could also say that RC Cola is the No. 3 cola in the United States. And it isn't that direct a comparison, because obviously T-Mobile was a significant player, and RC Cola isn't.

Shen: And causing a lot of pain for the bigger two players.

Kline: Sure. But this gives them the real economy of scale to, it's arguable whether they'll be No. 2 or No. 3 --

Shen: It's close enough, though.

Kline: -- it depends on how you look at some of the wholesale, the non-branded customers, but they're on equal footing, and that makes everything easier.

Shen: Yeah. The company headquarters will be in Bellevue, Washington, with a secondary headquarters in Overland, Kansas. T-Mobile CEO John Legere and his COO Mike Sievert, they'll keep their positions at the new company, while Sprint CEO Marcelo Claure and Masayoshi Son will take seats on the board of directors. 

As stand-alone entities, Deutsche Telekom controlled 63% of T-Mobile, and SoftBank had an 83% stake in Sprint. For the new company, Deutsche Telekom will hold a 42% stake, and SoftBank will control 27%. The remaining 31% will be in the public's hands. This goes back to that loss of control and how Deutsche Telekom will be holding the cards here.

Kline: You mentioned the management. The rest of the management positions are "going to be filled as needed from both companies." The reality is, T-Mobile executives are going to win that fight.

Shen: Yeah.

Kline: But because the two companies have to operate separately for what could be a very long time --

Shen: Assuming the deal closes.

Kline: Right. The last thing you want to do is name all these positions and tell the Sprint CTO, "Hey, you can stay, but you're going to be No. 2 in your department," when they need him for the next period of time. So there will likely be retention bonuses and a lot to come out, specifically with Sprint management, that looks likely to be at least knocked down a peg, if not eliminated.

Shen: Also, in terms of these different leaders at the companies, I'm curious if you've seen anything about why Masayoshi Son had a change of heart from just November to six months later, now, finally agreeing to this deal.

Kline: The cost of a 5G network.

Shen: Ah, OK.

Kline: Really, when you look into it, as much as they valued all of the assets they have in terms of spectrum, when you actually break it down on how many points you need to make this work on a nationwide basis, it was daunting and impossible, really.

Shen: Simply too costly.

Kline: $1.5 trillion, something like that, which, any of these companies on their own, without existing assets of spectrum and bandwidth and things that would sell for much more if you had to buy them on the open market now, it just wasn't going to work.

Shen: Yeah. I'm seeing here, most of the theories do have to do with that incredible cost of what building out the network would require and also a waning interest, apparently, in telecom for Masayoshi Son himself. The wireless market both here and his home market in Japan is saturated -- little to no subscriber growth, and there's very intense competition, and that's made worse because consumers are upping their data usage, so that requires more investment to continuously build out the network. 

And I see here, Sprint itself has put into its network, it's increased its spending from $4 billion to $6 billion in just the latest year, to keep up with the rest of the industry. That's putting a lot of strain on Sprint, on SoftBank, where the debt level is already pretty high. So sharing these costs with Deutsche Telekom and T-Mobile to build out the 5G makes it much more manageable. It also leaves Masayoshi Son a little bit more able to turn his attention to other parts of his conglomerate, including a lot of the investments he's made in these smaller, faster-growing tech start-ups.

Kline: And it's worth noting that Marcelo Claure, in his background, has done a lot of work in the 5G space and figuring out the viability of it. Not only will he be on the board of the combined T-Mobile, he's also on the SoftBank board of directors. So I would expect his role, whether it's an operational role or just an advising role, to be about the rollout of that network but also to leverage ways to use it for SoftBank that don't impact the wireless business.

Shen: Sure. So we've had the opportunity before the show to really dig into the presentation, the investor call, the company, this announcement, and also the press release itself. Let's start walking through some of the things that really jumped out to us. Any big merger like this is going to boast significant synergies, usually from cost savings. What does some of that look like here?

Kline: They say it's about $6 billion in synergistic cost savings, but the important thing, and this is different from any merger I have ever seen, is they have gone out of their way to say that due to rolling out the 5G network and the expense of that, that this will be a job creation opportunity. So yes, you'll probably have a lot of accountants and back-office people and customer service managers and people get consolidated and lose their jobs. But because they have to spend so much money on this new technology, they're going to add positions. They also talked about opening new stores, specifically in rural areas. And then, very quietly, they talked about consolidating stores. I know the T-Mobile store I go to is in sight of a Sprint store.

Shen: Anecdotally, a lot of these locations are so close to each other. If the combination goes through, it's hard to make a case for why these two stores need to be within a block of each other.

Kline: Right. But they're most certainly making very careful to address any potential regulatory arguments.

Shen: Yeah. And we'll get to that a little bit more. Closing out this synergies piece, I'll quantify a few things. They have estimated $6 billion in annual run rate synergies -- $4 billion of that will come from the network, sharing that infrastructure, splitting the capex. $1 billion will come from the sales, service, and marketing side as they consolidate the retail footprint in certain markets, they combine marketing, weed out other redundant functions. Then, the final $1 billion will come from tying up back-office functions. We see those kinds of savings in a lot of mergers between peer companies.

Sticking to the financials side of things, I'll just mention that the company forecasts 3% to 5% long-term annual growth for revenue as it grows. From the pro forma for the current combined company, it would be about $75 billion on the top line. They see 3% to 5% growth to nearly $100 billion. Then, their adjusted EBITDA, that's earnings before interest, taxes, depreciation and amortization, that's currently at about a 40% to 42% margin. They're hoping long-term to target that expanding to about 54% to 57%. Then, over time, management will also be focused on increasing their free cash flow, reducing the debt load, because it's about $75 billion total right now for the combined company. They'll definitely want to lower that.

Let's move on now to what you were talking about, in terms of the presentation of this deal. That's how T-Mobile and Sprint are packaging this to appeal to both the public and regulators. Dan, when we were comparing notes before coming to the studio, I think you hit the nail on the head when you called out the press release as being written specifically, almost, for the Trump administration. Can you walk through some of the stuff --

Kline: Short of spray-painting the T-Mobile logo gold, this is written for one audience. [laughs] 

Shen: [laughs] Yes.

Kline: And it's very clever. Basically, the stories that have come out are, "The U.S. will fall behind China in 5G if this doesn't happen," and it lays out the case for why AT&T and Verizon are not going to be leaders in this. Whether that's true or not doesn't matter, that's the argument they're making. Second, they are talking about how, yes, the Obama Administration made the case that there were four players, and it would be reduced to three. They are arguing that there aren't three anymore. Specifically, they talk about how Comcast is the fastest-growing in terms of adding new subscribers. Again, if you have zero and then start offering, it's not hard to be fast-growing on a percentage basis. But they're making the case that cable companies will get into the wireless business, and thereby, consumers do not have three options, if this happens.

Shen: They actually have more than that. But these are very early efforts, and they're completely unproven at this point.

Kline: Right. And then, we talked about the jobs case. They're saying, "This is not going to lead to a loss of jobs." They're hitting all of the Donald Trump touch points: the fear that another country is going to do better than us, the job creation. And really, it's a line-by-line setup for going in and saying, "This has to happen. These two companies aren't viable. The U.S. won't get to where it needs to go." It's a very smart play.

Shen: Yeah. They've definitely spent a lot of time thinking about how they're going to sell this to regulators. To wrap up all the stuff you mentioned, there's that greater capability that they believe the new T-Mobile will have over AT&T and Verizon to build out a 5G network, and how that's going to be this key battleground among world economies in the next era of technological development. So that's one part of it. 

The investor materials, the presentation, they specifically bring up how 4G created this foundation for American tech companies, and it allowed Apple, Amazon, Alphabet, these American names, to become dominant players in the space. And then, on top of that, they also posed the idea of how this far-reaching 5G network would also pose competition in another industry, in terms of cable internet companies, in regions where service is limited to one provider, it's poor quality in general -- another sell for the 5G expansion. And then, the new T-Mobile, they claim it will expand their workforce as they spend tens of billions of dollars investing in the new network build-out, how they'll have an even bigger retail footprint, because they start dedicating more attention to rural customers, employees building out the infrastructure, stuff like that. The new T-Mobile will also have greater scale and resources, they say, to continue the Un-carrier initiatives. That's not going away, right?

Kline: The last area to talk about, in terms of things that regulators worry about, is price competition. And while there's no direct promise here, T-Mobile more or less said, "Hey, we're T-Mobile. Price is our thing. We're not going to change that." And that's probably true when you come to the everyday, non-deal, non-promotional offer. T-Mobile is cheaper than AT&T and Verizon in non-promotional cases. But what I think you are going to see a loss of, and this will hurt consumers, is the super-deal. The, "Hey, Verizon customer, we'll give you six months free to switch over," or, "We'll give you two iPhones for the price of one as a gift to get you to switch." You're not going to have as much incentive to do those sorts of crazy offers.

Shen: The special promotions.

Kline: Yeah. And Sprint has been a real leader, as we talked about earlier, in really cheap deals. But in terms of the questions the regulators are going to ask -- are you going to raise your regular prices -- I think T-Mobile can comfortably say, "We're not going to raise prices at any faster of a rate than we have, and our goal is to be the lowest price carrier." And I think honestly, you can believe them, based on their history.

Shen: Sure. So we have a few more minutes here. I figure we can spend it going into some of the antitrust regulatory concerns and our personal thoughts on this deal. If you're a betting man, how do you feel about the odds for this deal?

Kline: Well, without getting too political here, I think it happens. The way to get President Trump to be behind something is to appeal to him, to his vanity, to the ways he thinks about things. So is he going to want us to be behind China on 5G? I don't think so. He likes when a company kowtows to him and says, "Oh, please, we're going to do it all your way!" This was very smart. Right after they hit send on the press release, Marcelo Claure and John Legere called Ajit Pai, head of the FCC, a Trump appointee and the person who would take the lead, in terms of at least one aspect of the regulatory approval. And they laid it out, and he basically said, "Hey, I said I'd give you a fair shake." So they're already starting with a chance.

I have very mixed feelings on whether this is good for consumers. I don't buy the Comcast-as-competitor argument. What I do believe is that -- I've been a T-Mobile customer for a few years. I was a Sprint customer before that. And T-Mobile's pricing has always been fair. They don't raise it, they give you more stuff. I get Netflix for free now. So as a consumer, I do put a lot of belief in them. How much of that is John Legere, and if he moves on in a few years, does that change? How much of it is core, baked into what they're going to do? Or how much changes if, all of the sudden, they really are a solid No. 2 and don't need to be growing as fast as they're growing?

Shen: To be this scrappy underdog.

Kline: Yeah. But I think you have decades to figure that out. They're going to roll out a cable product. That's a pretty big growth opportunity, aside from adding wireless customers.

Shen: Sure. I'll just say, despite how much Legere and his team are trying to sell this deal as not a reduction in competition due to those cable companies that we talked about, or how it'll give the new T-Mobile more options to improve their pricing, their service for consumers, I think the fact is: Sprint is the low-cost provider right now with the aggressive promotions that they're putting out there, forcing other companies to follow suit. Then, you add to that the T-Mobile Un-carrier initiatives that are still the smaller No. 3 competitor, and we see how that dynamic is very beneficial for consumers.

Kline: If you look at the market now, Sprint and T-Mobile are competing with each other to take customers from AT&T and Verizon. That forced them to outdo each other. So T-Mobile goes out and gets Netflix. Sprint goes out and gets Hulu. You know?

Shen: It's a very interesting dynamic that I think is very beneficial.

Kline: And that's going to go away. They will still be competing with AT&T and Verizon for customers, but they're already cheaper than them. They already have better customer service and cooler perks and a hipper image. So they're not going to have to go as low, and that's something. But is Sprint sustainable as a stand-alone company, giving away service?

Shen: We'll get to that. I just want to bring up the comparison to the broadband industry. I pose this question to any listener: Who's happy with the number of options and the service that they get from their broadband internet provider?

And the fact is, you see how single providers, basically monopolies, exist in a lot of regions in this country, where it hurts consumers with poor service, slow speeds, and forget the idea of switching costs. Where do people go when there's no one else to turn to, because you only have one option? So that's something that, again, I think I share the sentiment of the previous administration in terms of the regulators fearing that going from four to three isn't going to be benefiting consumers in the end.

But if we look at deal precedents now, so taking a more standardized, formalized look at this, I'm also skeptical that this deal is good for the market, and I'm optimistic that regulars will step in. Go back to 2011. AT&T attempted to complete their own takeover of T-Mobile, but regulators in President Obama's administration, they again fiercely opposed the deal. The companies tried to pitch the deal as a rescue of T-Mobile, basically saying, it's the lagging No. 4 player. And even though AT&T said, "We'll make major concessions," like selling off big parts of T-Mobile to other competitors, "to make this deal go through," it didn't happen. The deal fell apart late in 2011, and T-Mobile ended up taking home a $4 billion breakup fee, some spectrum.

But market sentiment at the time was, "Oh, T-Mobile is going to end up being the big loser from this failed deal, because they're not going to be able to compete." But where are we now? It's 2018, seven years later, T-Mobile is No. 3. They're putting up some of the strongest growth numbers in the whole industry. So it's hard for you to buy this argument --

Kline: That's the biggest problem with the two parent companies having such deep pockets. You can't really argue that they're just going to go away. There are also other moves to be made. Sprint talked with Charter and Comcast, and there was a lot of logic to that deal happening. And again, it fell apart for control and promises. But there are other players in this space who could benefit. So this isn't AT&T and Time Warner, which is a deal that, currently, the Department of Justice is suing.

Shen: It's going through the final process. We'll hear about that soon.

Kline: Yeah. But that deal, as you mentioned earlier, is more of a vertical deal. It's a company acquiring more assets that don't relate to the ones it has. This deal is a little bit closer to the failed Staples-Office Depot, where from a consumer point of view, you will lose choice. And it's very hard to argue that the fact that there are a few secondary brands offering limited service -- if Budweiser goes off the market, the fact that some guy in your neighborhood brews beer that's sold at three shops doesn't really change the overall market.

Shen: [laughs] A stretch, but I hear where you're coming from. So if part of the rationale for this deal is to save Sprint because they're struggling, high debt loads, have to spend a lot more money to build out their network. I'm not going to deny that the spending, necessarily, for the company to remain competitive is substantial, but I also don't think it's clear for anybody how things will pan out even just a few years from now, given the way these companies are expanding, for example, like you mentioned, into the cable space. 

So 2014, Sprint first approached regulators about a deal. They got shut down, too. We talked about that already. I don't think anything has changed from that situation except that Sprint and T-Mobile have switched their rankings.

Kline: We also have to talk about, the value of 5G is a theoretical in the wireless business. 4G, for everything you do on your phone now, except possibly stream certain video, 4G is just fine. So to assume that a 5G network is necessary on the consumer level -- not on the corporate enterprise level, not with all the Internet of Things that you could do -- it assumes that we're going to have cable or something like it, high-level video, delivered over these. Consumers have to adopt that for it to happen. It's a really big switch to go from a wired cable box and cable on every TV in your house to some other system. And we've seen it with the OTT, Sling TV, and things like that. They're nice niche products, but are you actually going to get widespread change? You might. T-Mobile has shown it can disrupt. But it's certainly not a foregone conclusion.

Shen: Sure. So we're out of time here. I'll end on this note. This is about the 5G part of the sales pitch for this deal, and the idea that AT&T and Verizon are not working on getting their 5G networks built out. I think that's absurd. The companies are absolutely pouring money into the opportunity. You're right, it's theoretical. But given the added capacity and speed that it offers, there's definitely a lot of perks, and there's a reason why a lot of people are looking at it.

Kline: They also own related products that make a lot of sense, in terms of 5G.

Shen: And from what I've seen on AT&T's side, for example, they're already planning to test the service in certain markets by the end of this year. Small-scale tests, admittedly, but I don't think it's fair to make this argument that they're not dedicating enough attention to the opportunity, and that this new T-Mobile is the only way that U.S. companies are going to be able to secure it.

Kline: What is interesting is that T-Mobile is pledging to do it nationally. AT&T and Verizon likely would have done it much more selectively, as we saw with 4G during the initial rollout. So there is a benefit. If they promise and give a timetable, that will force AT&T and Verizon to do the same. But all this would do is speed it up. AT&T and Verizon were not going to ignore this opportunity.

Shen: Yeah. Alright, have to end there. Thanks so much for being here, Dan!

Kline: Thanks for having me!

Shen: People on the program may own companies discussed on the show, and The Motley Fool may have formal recommendations for or against any stocks mentioned, so don't buy or sell anything based solely on what you hear during the program. Fool on!