There’s only one way for T-Mobile/Sprint to satisfy regulators

T-Mobile and Sprint are small players in a wireless market where being small makes it hard to survive. One expert told me that if the deal is framed as a pairing of two of the four national wireless carriers, it has little chance of making it past the regulators. That’s why T-Mobile CEO John Legere and Sprint executive chairman Marcelo Claure have been trying to describe the combined company as a new kind of entity that sells not only wireless service, but potentially home broadband service and a host of media in the future. A combined T-Mobile and Sprint will very likely aspire to sell new kinds of broadband service like fixed wireless service for the home. Sprint owns a treasure trove of 5G wireless spectrum. That combined with T-Mobile’s considerable 5G spectrum holdings will pave the way for those. Which view will more closely match reality a year or two after a merger? In reality both will likely prove true. The merger will likely degrade competition in the wireless space over time, but it will also likely create a stronger single company with a much better chance of survival. The new company would instantly be roughly the size of Verizon and AT&T, with a subscriber share of about 29%. A period of “rationalizing” the two companies’ redundant people, facilities, and technology (the companies have said that $40 billion in “efficiencies”) could result in a more efficient and competitive company. What we don’t know is the balance of the two effects. Moreover, the new company will not just be competing with the other national wireless companies (AT&T and Verizon), but rather with any company that sells wired or wireless broadband and, increasingly, internet TV service over the top. This could mean Comcast, Charter, Frontier, and Century Link–companies that are increasingly making a living by selling broadband service.