It appears a huge hurdle blocking T-Mobile (NASDAQ:TMUS) from taking over Sprint (NYSE:S) has been removed. The Justice Department late last week signed off on the deal after T-Mobile agreed to sell Sprint's pre-paid wireless business to DISH Network, which will eventually create a fourth national wireless carrier.
T-Mobile and Sprint must still resolve a lawsuit filed in June by 13 states and the District of Columbia to stop the merger. But representatives for several states say they are now reconsidering their involvement based on the news of a federal deal and its agreed-upon changes. T-Mobile says it's confident a settlement can be reached.
Federal regulators have long stood in the way of the merger, believing that four competitors shrinking to three would be bad for consumers. That has always been faulty logic, however, since none of the big four carriers ever offered the lowest price. The cheapest monthly plans always came from second-tier carriers leasing network space from the larger carriers.
It was also a bad premise because T-Mobile has built its business on disrupting an industry that was always especially unfriendly to consumers. T-Mobile CEO John Legere seemingly delights in undermining AT&T (NYSE:T) and Verizon (NYSE:VZ), forcing them to abandon lucrative practices like overages and long-term contracts. That's not going to change just because one player has come off the board.
What has T-Mobile done?
Under Legere, T-Mobile has punched above its weight class. Despite being the fourth-place wireless carrier when Legere took over, it has set the tone for the entire industry.
Marketing itself as "The Un-carrier," a clear alternative to industry leaders like Verizon and AT&T, T-Mobile steadily did away with what had once been industry standards. It called for:
- Ending overage charges,
- Making all plans include unlimited data, and
- Getting rid of long-term contracts.
T-Mobile also included all taxes and fees in its advertised prices, offered family-plan customers free access to Netflix, and created what it called T-Mobile Tuesdays, a random giveaway that has included everything from free tacos to complimentary movie tickets.
These moves have led to the company adding more than 1 million net customers for 25 straight quarters. That helped it move from the No. 4 carrier to the No. 3 spot -- but that still leaves it about half the size of AT&T and Verizon. In fact, even after acquiring Sprint T-Mobile will remain in third place by subscriber count, though much closer to its bigger rivals.
For the past six or so years, T-Mobile has been the little guy forcing AT&T and Verizon to make changes. Adding Sprint's customers base allows Legere and his company to take that competition to the next level.
Why would T-Mobile change?
One thing will probably go away if and when the T-Mobile/Sprint deal closes: Sprint's absurdly low prices. That's because those offers, while good for consumers, were never financially smart long-term plans. They were short-term desperation offers designed to make Sprint look better to potential acquirers.
T-Mobile won't offer money-losing prices just to temporarily gain market share. It has shown, however, that it will keep prices competitive -- it has agreed not to raise them for three years after the deal closes -- and force AT&T and Verizon to not engage in less-than-consumer-friendly practices.
Americans don't need a certain numbers of carriers to create competition. They need one carrier willing to cast aside the industry's unwritten rules. T-Mobile has clearly done that, which has cost AT&T and Verizon billions in overage fees. Legere has shown that he will continue to identify consumer pain points and fix them.
A bigger T-Mobile should be an even larger agitator, and continue to change its industry by setting a consumer-friendly tone. That's not something AT&T or Verizon wants, but when those companies don't want something to happen, that's probably something consumers should really hope does happen.