Under oath, economics professor says that Sprint's future is not so bleak

Under oath, economics professor says that Sprint's future is not so bleak
Yesterday, the trial that might determine whether T-Mobile completes its merger with Sprint reached day three. For those who need a quick recap, the plaintiffs, in this case, are 13 state attorneys general and the AG of Washington D.C. who want to block the $26.5 billion transaction because they view it as being anti-competitive. They worry that the loss of Sprint will reduce the number of major wireless operators to three from four. That's despite the deal between Sprint and Dish Network that would help turn Dish into a fourth major carrier once T-Mobile absorbs Sprint.

The Seattle Times reported today that on Wednesday, a University of California, Berkeley economics professor named Carl Shapiro testified in the Manhattan courtroom. Shapiro told the judge that if the merger is completed, the three remaining major wireless providers (Verizon, AT&T, and T-Mobile) could coordinate a price increase valued at $8.7 billion. He also added that T-Mobile alone could hike prices by $4.6 billion. However, the professor failed to mention that in order to get approval for the transaction from the FCC, T-Mobile promised not to raise prices for three years after the merger closes. But evidence produced on Monday by the states included a text from Sprint marketing chief Roger Solé to Marcelo Claure, who was then CEO of the company. The message said that if the deal closes, the average revenue per subscriber could rise $5 a month. Tim Höettges, the chairman of T-Mobile parent Deutsche Telekom testified that the merger will lead to lower prices for wireless customers.

This merger has always been about 5G and Sprint's 2.5GHz mid-band spectrum

The plaintiffs say that if the deal closes, the nation's top two wireless carriers, Verizon and AT&T, will face less competition from a combined T-Mobile-Sprint. With all due respect to the professor and other witnesses called by the plaintiffs, we think that T-Mobile, the most innovative and fastest-growing of the majors, would be more of a threat to its rivals if the merger is allowed to happen. And if the deal is not made, Sprint will probably fail anyway, also reducing competition in the industry. In response to a question from the judge about the future Sprint might have as a standalone company, Jay Bluhm, the vice president of network development and engineering, said, "Sprint would not be viable within the next two years." Shapiro, the economist, says that the future for Sprint is not as bleak as the defendants portray. He testified that projections don't show Sprint losing significant market share if the deal is blocked.

The merger has never been about Sprint's operations and has always been about Sprint's hoard of 2.5GHz mid-band spectrum. T-Mobile covets these airwaves because mid-band spectrum in the U.S. is hard to come by and the carrier wants it to help improve the first nationwide 5G network that it launched last week using its 600MHz spectrum. Sprint's mid-band spectrum, in T-Mobile's hands, will allow it to cover more rural and low-income areas with 5G signals. Harnessing the faster data speeds of 5G is important to the U.S. since the next generation of wireless connectivity is sure to lead to new technologies, new industries, and new companies that might lead to an economic boom in the country.

The trial is expected to run past Christmas and is the only thing that stands in the way of the merger's completion. The deal was originally announced on April 29th, 2018. With the merger agreement between both companies no longer active, there has been some speculation that T-Mobile will seek to lower the price it pays for Sprint. While the former has been adding new postpaid phone subscribers, Sprint's last quarter showed a decline in that category.



1. Venom

Posts: 4011; Member since: Dec 14, 2017

They are kidding themselves if they think Sprint has a future outside of the merger. Sprint is bleeding red left and right. They will not survive without someone picking them up. Even Softbank has given up on them.

2. Gawain

Posts: 452; Member since: Apr 15, 2010

Never rely on academics to provide real world testimony. They don't know. Sprint, left alone, is out of business. Between their debt burden, cash burn, and subscriber losses, their only asset is the licenses they hold, and those alone are not enough to bail them out at this point. Let them go under, then the rest of the industry will pick at the carcass of remains for less money...

3. Alcyone

Posts: 621; Member since: May 10, 2018

Unless At&t would feel real generous, T Mobile wouldn't stand a chance auctioning. That'd be the first problem, second is this little outfit called Verizon.

5. LordDavon

Posts: 184; Member since: Sep 19, 2011

Sprint has all of the components to build out a very competitive 5G network -- which is why T-Mobile wants them. Technically, Sprint could turn things around if it were managed properly. Therein lies the issue though. Sprint has been so mismanaged for the past decade that there is little hope of them turning things around.

6. GrosseFatigue

Posts: 211; Member since: Jul 27, 2011

I disagree. You have to live under a stone to go with Sprint.

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