The proposed merger of T-Mobile and Sprint has plenty of implications for the US domestic market, but if it goes ahead, the ramifications will be felt beyond its borders.
Included in the two parties’ joint statement was plenty of rhetoric about how the combination would be good for American consumers and the US wireless industry as a whole because of the ability to roll out nationwide 5G.
Some of this could be interpreted as the first strike in a potential tussle with regulators and rivals Verizon and AT&T, but there is some truth in its peacocking.
T-Mobile and Sprint
It claims that neither Sprint nor T-Mobile have the means to build a national 5G network alone, but the combination of their assets means they could do this more rapidly than anyone else.
This is because T-Mobile has long range 600MHz airwaves, whereas its rivals only have mmWave spectrum which offers vast capacity but only within a limited radius. The two companies also assert that Verizon and AT&T would have to “kick” customers off LTE to facilitate the rollout.
It is expected the first commercial 5G networks will go live in a few cities in 2019, but the prospect of a truly national 5G service could give the US the edge it needs to be the true world leader in 5G.
“Together with a stronger financial position and a wider user and income base, those spectrum holdings would be leveraged with expedited nationwide deployment of 5G with an investment of US$40 billion over three years,” said analysts as IHS Markit. “T-Mobile assert that would pressure competitors – AT&T and Verizon - to improve their own 5G network plans with concomitant benefits to the United States of such an investment in infrastructure.”
The ‘5G race’ is more than just about nationalism or a hypewagon manufactured by the sector – it has real implications. The US led the way when it came to 4G and research from Recon Analytics estimated that this contributed more than $100 billion to US GDP and increased jobs within the wireless industry by 84 per cent. Conversely, Europe and Japan’s failure to maintain leadership led to a contraction in their respective mobile sectors.
It is this economic impact that helps explain why the race to be the leader in 5G is so intense. The UK has ambitions to be a 5G leader through its research and startup communities, but another report from CCS insight has suggested Europe is at risk of falling behind because of market fragmentation, increasingly strict regulation and a focus on 4G.
“When countries lose global leadership in a generation of wireless, jobs are shed and technology innovation gets exported overseas,” said Roger Entner, Founder, Recon Analytics.
Global 5G race
The true race is between the US and Asia, and it had been suggested that China had the edge because of a high level of government support and industry momentum. What was keeping the US in the hunt was its 4G heritage.
“Our research shows China with a slight lead in 5G readiness, with South Korea and the US close behind,” said David Abecassis at Analysys Mason. “The US led the world in 4G, and the US wireless industry is leading global 5G research and development with aggressive commercial 5G deployment plans that will benefit U.S. consumers.”
The deal between T-Mobile and Sprint and the emphasis on 5G could be what the US needs to gain that crucial early mover advantage. It would also build on other developments such as the US government blocking Broadcom’s bid for Qualcomm amid fears that it would allow Huawei, and therefore China, to take the lead with 5G. This was deemed a national security risk as well as an undesirable economic factor.
CTIA, the US wireless industry body, says the country can leapfrog China and keep its position as an industry leader.
“The United States will not get a second chance to win the global 5G race,” said Meredith Attwell Baker, CTIA President and CEO. “I’m confident that America can win and reap the significant economic benefits of 5G wireless due to our world-leading commercial investments.
There’s no guarantee that the deal will go through. Sprint and T-Mobile have attempted to merge before, but this time they have pointed out that in an increasingly converged communications sector, competition is not at risk. They also believe 5G can provide genuine competition in areas with just one supplier of high speed broadband.
“T-Mobile/Sprint also push the message that passing the deal would not reduce the effective number of significant operators to three, pointing out that the market is increasingly a converged one,” added IHS. “Cable operators such as Comcast, Charter and Altice are using MVNO agreements to enter the wireless market and offer integrated converged products, making for ‘7 or 8 big competitors’.
“Despite the touted benefits and the total size of the company remaining below that of both Verizon and AT&T, the deal is likely to face significant regulatory scrutiny.
“Sprint and T-Mobile are therefore playing different perspective and inviting the authorities to view the deal in the broader perspective of a converging market where the boundaries have blurred and the deal could actually work to increase competition in what is currently an adjacent and uncompetitive market – fixed line broadband.”
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