States are looking to jam T-Mobile and Sprint’s proposed $26.5B merger | Hacker News Reader

States are looking to jam T-Mobile and Sprint’s proposed $26.5B merger

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53 pointssrnvs62 comments

While I'm usually wary of giant corporate mergers like this, the fact that they are 3rd and 4th leads me to believe it would actually position them to better compete against Verizon and AT&T in a way that would be good for consumers.

Let them invest to compete, instead of merging. Merging will only make things worse.

Compete how? Competition with the market leader will improve if this merger results in a more formidable opponent.

They should become more formidable without merging.

T-Mobile moght, Sprint won’t. They are a distressed company and no amount “shoulds” will change their trajectory. The question is whether T-Mobile deserves to grab all of Sprints customers in a “migrate by default” scheme, or their gonna have to fight for those customers when Sprint inevitably goes down.

Exactly. Sprint is tanking. Who else should be able to acquire it?

ATT nor Verizon would be able to acquire Sprint the company. But if the company goes down without being acquired by T-Mobile, let's say their customers would migrate to the remaining 3 carriers proportionally existing market shares. This outcome would be pretty great for AT&T and Verizon and strictly increase the market concentration.

Approve or not approve, regulators are sometimes forced into a position of "picking winners" :-(

Another thing that needs thinking through is what happens to Sprint's spectrum if the company goes under. What kind of rules will be placed on that auction? Would ATT and Verizon be likely winners of such an auction?

If either of them knew how to do that I think they would have by now. For real, if you can tell either of them how you'll be an overnight millionaire.

How are they going to invest? They make barely any money and are saddled with massive amounts of debt and no way to raise

How do you figure? If they merge, we get three main market leaders all competing head to head.

If they don’t, Sprint tanks, and we still have three main market leaders, however two will remain significantly ahead of the third. Keeping in mind that the two that are ahead are now playing the monopoly game and buying into other industries (see AT&T and Time Warner or AT&T and DirecTV or Verizon and Yahoo, etc)

Break up Verizon and AT&T.

We then need to keep them broken up.

I strongly disagree. These are the lower priced, more scrappy competitors. I think they'll reduce competition, especially toward lower priced customers.

No, they'll just have poor service from not enough towers and spectrum.

This makes no sense to me. There is no reasonable reality where Sprint becomes a healthy competitive force in the US as a standalone business.

Instead of approving this merger, is there another way the government could encourage competition? Perhaps break up the larger carriers or some how promote new upstart competition?

Your statement sounds correct but I don’t exactly like the reality.

Manage the cell tower infrastructure and spectrum themselves through a non profit GSE (government sponsored entity) (think ISO grid operators for electric grids) and make every commercial provider an MVNO stakeholder. Similar to a municipality owning the last mile fiber to the house, and any provider can provide you service with a quick patch cable or VLAN change at the central office/colo facility.

Running a nationwide cellular network is expensive and complicated AF. You have to provide a level playing field if you want to enable competition without needing hundreds of millions of dollars to start up.

with 4G finally getting fast enough (along with the low latency promises of 5G), i think we're almost at the point where what you propose might make sense.

before this, wireless tech/infrastructure just wasn't good enough, and needed continuing investment to improve. now that we're over the hump, a GSE can begin buying up the 4G infrastructure and leaving operations/service to the carriers.

since there are 4 national and some regional carriers, you could even divvy the duplicative infrastructure up between state and federal GSEs, much like state and federal highways. then you'd have some semblance of competition that would keep the infrastructure from just crumbling away from political/bureaucratic neglect.

Competition between carriers has partly driven the widespread availability of coverage. Several carriers compete on the basis of their coverage. A government-funded entity seems highly unlikely to provide optimal coverage, or to do so in a cost-efficient manner.

I'm not categorically against government-run solutions. But the cellular market isn't so obviously broken that a government-run system has any hope of being better. U.S. market concentration in cellular is less than for shipping, ecommerce, and soft drinks, and a lot less than for mobile operating systems, search, or social media. Verizon and AT&T's combined market share of about 68% is about the same as Apple and Samsung's combined share of the U.S. smart phone market.

I don’t see how. Most of the small carriers piggyback off the big 4 networks anyways.

Breaking up the carriers would be worse for consumers. Every carrier now has some semblance of “nationwide” coverage.

Break them up by region? With ability to use each other’s equipment? Idk, I’m shooting in the dark.

Yeah I know....

I guess you could enforce roaming agreements like they do in the EU(?) but then you still would have carriers having to negotiate with each other when one carrier has more external roaming traffic with the other - like Internet peering arrangements.

I don’t have a strong emotional opinion either way. Just trying to come up with pros and cons.

Breakup by region would not increase competition from the perspective of most consumers. They would have the same number of options.

Government owned infrastructure that anyone can rent space on. That way there is minimal startup costs.

If we did that 30 years ago, we’d have really affordable GPRS systems. We can’t even upgrade bridges and dams.

do...do we want GPRS?

That's the parent's point. If the government owned the wireless infrastructure, that infrastructure would be in the same state as our dams and bridges (i.e. not good).

Obviously your government has to not be a disaster before this will work.

Fun fact: Maryland's transit agency recently moved to diesel technology for its next generation of commuter train locomotives. The railroads in this area were first electrified more than a century ago, and most of the last several generations of locomotives were electric. But the overhead catenary is in bad shape, and some lines have stops that haven't been electrified. Maryland apparently believes that, over the 20-30 year service life of these locomotives, the infrastructure is likely to deteriorate further (to 19th century levels), instead of improve, such that diesel is the smarter option.

That's what people said when AT&T tried to buy T-Mobile.

Cingular buying ATT Wireless? Sure no problem.

Both were still somewhat regional, and that acquisition made a national carrier out of it.

Edit: found a spectrum map reportedly from the acquisition

https://www.howardforums.com/attachment.php?attachmentid=888...

And AT&T paid T-mobile $6 billion in cash and spectrum afterwards because of the failed merger.

T-Mobile was going to crap before its failed merger to ATT. It would be stupid to think Sprint can't turn itself around either.

T-mobile “turned itself around” partially because of the $6 billion that AT&T had to pay

https://dealbook.nytimes.com/2011/12/20/att-and-t-mobile-wha...

Also, T-mobile was hurting because it was the last major carrier that didn’t have the iPhone.

T-Mobile also merged with MetroPCS after the failed AT&T merger which was key for their resurgence.

T-Mobile's turnaround had a bunch of facets.

1) Increased spectrum. In 2011, T-Mobile didn't have the spectrum to launch a competitive LTE network. AT&T had to divest spectrum to T-Mobile as part of the breakup and they gained spectrum through their merger with MetroPCS giving them 20MHz of new spectrum. 20MHz of new spectrum is an LTE network right there. In some ways, AT&T's decision to offer spectrum as part of the breakup fee might have pushed the FCC to deny the merger. "T-Mobile can't compete due to its spectrum position...which would improve if you denied this merger and might put them in a position to compete."

2) Increased customers. MetroPCS added 28% more customers, 26% more revenue, and 29% more EBITDA (earnings before interest, taxes, depreciation, and amortization). In an industry that relies a lot on scale, that's pretty important. It moved T-Mobile from a very distant 4th place where Sprint was 61% larger to a much closer 4th where Sprint was only 21% larger.

3) Finances. T-Mobile's finances were a lot better than Sprint's and Deutsche Telekom reduced T-Mobile USA's debt as part of the MetroPCS merger by $3.8B. That meant that the new T-Mobile had a solid footing to go forth.

Sprint, on the other hand, is getting crushed by debt. T-Mobile's net debt in 2013 (when they started making their comeback) was $15.3B over 44M customers or about $348 per customer. Sprint's debt is $32.9B over 54.5M customers or about $604 per customer. A lot of that debt is coming due over the next couple years. If Sprint is paying that debt and doesn't have the money to invest in 5G, it's hard to make a turnaround.

Sprint has $27.6B in debt maturing from 2019 through 2023 (5 years). That's going to make it hard for Sprint to invest in its network during critical years for 5G deployment. They'll be competing against a T-Mobile that can get loans at better rates and has about half the debt Sprint has on a per-customer basis. T-Mobile is profitable and has revenues about 32% higher than Sprint.

4) Timing. T-Mobile launched the Un-carrier while customers were still making up their minds about LTE and hit the ground running fast. They announced targets for LTE coverage and blew past them inspiring consumer confidence. They broke new ground on pricing and features offering a more consumer-friendly approach to wireless - no contracts, trading in phones for upgrades, free international roaming, paying off ETFs to get switchers, music streaming that didn't use data, video that didn't use data, and finally unlimited. Likewise, T-Mobile was going up against an AT&T and Verizon that were only two companies and had become very anti-consumer and very unfriendly.

Today, the timing isn't there for Sprint to do the same. AT&T and Verizon were broken by T-Mobile. They now offer unlimited and while they might not be the best deal, they make sure to remain competitive.

Likewise, Sprint would have to compete against three strong companies instead of just two. That's a much harder proposition. These are three companies with way more customers. T-Mobile is now 50% larger than Sprint. These are three companies with more revenue and profits to invest in their networks. These are three companies with more low-band spectrum to provide broad coverage. These are three companies that aren't under crushing debt.

5) Spectrum Mix. Ultimately, Sprint's assets are different from the other three companies. Low-band spectrum covers a larger area and provides broad, reliable coverage. The other three carriers have 3-5x more than Sprint. Mid-band spectrum was used to supplement that for greater capacity and the other carriers have about double what Sprint has. Then Sprint has a lot of high-band 2.5GHz spectrum that doesn't cover as much area. Clearwire and Sprint have been trying to use that spectrum for over a decade and it's not fruitless or anything, but it's unclear whether that spectrum will provide compelling mobile service that will truly compete.

Now, that spectrum could be quite useful for 5G. However, Sprint doesn't have the finances to go on a huge spending spree to add more cell sites (and they have far fewer than the other three) and mobile use still might need more low and mid-band spectrum than Sprint has to create a robust network that doesn't feel patchy.

I think it's easy to say that Sprint could do what T-Mobile did. However, I think there are key differences. T-Mobile changed its possible future by adding 20MHz of new spectrum (increasing its total spectrum by 38%). The addition of MetroPCS customers meant that Sprint was only 21% larger while T-Mobile stands at 50% larger than Sprint today (and that gap is growing as T-Mobile adds millions of customers each year). T-Mobile's finances were simply so much better. They were barely profitable, but profitable with so much less debt. The timing was right to disrupt the market as AT&T and Verizon kept making increasingly consumer-hostile moves and jacked up prices a lot, but that isn't the market Sprint faces today. Finally, it might just be that Sprint's spectrum mix makes it hard to create a network that customers love.

It's certainly possible that Sprint could turn itself around, but T-Mobile was in a very different situation when it launched its comeback.

It makes plenty of sense. The goal is to not let the number of wireless carriers go from 4 to 3. If Sprint is not viable then they'll file for bankruptcy and then Charter or Comcast (or both of them together in a JV) will probably pick up the assets.

What's the thinking here? Stopping the merger of the two insignificant players would only shield the major players from real competition.

ATT & Verizon have impressive lobbies.

My hunch is they would welcome the merger

I left Sprint because I hated their guts. I went to T-Mobile.

The real answer to this is to break up AT&T, Verizon, and Comcast while blocking the T-Mobile/Sprint merger.

This will probably help net neutrality slightly since T-Mobile and Sprint gotta duke it out offering more network throughout to customers while AT&T and VZW compete over speed... the four sort of forcing each other to sort of almost make something which appears neutral (it’s not).

Unless there are no gigantic telecoms or there’s way more government intervention in these markets (common carrier status anyone?) there will be no point in things like this against the bottom tier national providers.

At this point I'm just rooting for them to get together. They're like star-crossed lovers: Romeo Corp and Juliet Inc.

"The lawsuitm" typo

The problems facing the US in competing with China are structural.

No Amount of mergers between giant monopolies is gong to fix structural problems.

On a cynical level, it maybe that "China" is used as an excuse to push through a merger for profits, but lets assume some innocence.

The execs. realize how costly 5G is going to be, and the only way they know to borrow that amount of money is increasing their underlying capital assets.

The problem is that Huawei became successful in 5G through massive government investment, currency arbitrage ( supported by the US ), cheaper land, cheaper engineer, ...

Just a side note, have a look at how Huawei operates. They build a giant 60,000 engineer city for their employees !

Is the US ready to create a giant 60,000 engineer city to compete in 5g ? where engineers are paid a fat salary with low rent ? ( in PPP terms )

5G maybe the reason why the US has to finally confront the structural reasons why they have become so uncompetitive in electronic hardware in relation to East Asia.

Let's not forget that our government is mostly run by people with law degrees while china has a large amount of technocrats. Making it much harder to get state-scale large engineering and software projects going in the U.S..

There was a time when the us was led by a technocrat. His name was Herbert Hoover.

We have had a leader being a technocrat/rich businessman only once before in US history. That was Herbert Hoover. Now Trump. Neither have done anything amazing for business and/or innovation.

yea trump has no idea how a computer works...

The list of Trump's attempted businesses is hilariously sad (except the Fraud which is just sad). Don't even get me started on his Snazzle Snacks pyramid scheme.

Or Trump: The Game

A little confused how China has "succeeded" in 5G to begin with. Has 5G already been deployed in China? Are 5G phones out over there? Is it actually what it was claimed to be in the past few years? In what way has it been already successful?

http://archive.is/pVwbM

> The NSA’s ‘Tailored Access Operations’ unit broke into Huawei’s corporate servers and by 2010 was reading corporate emails and examining the source code in Huawei’s products.“We currently have good access and so much data that we don’t know what to do with it,” boasted one NSA briefing. Slides also disclosed that the NSA intended to plant its own backdoors in Huawei firmware. In 2014 the New York Times, Time and Reuters revealed that the NSA had infiltrated Huawei headquarters, monitored all of its executives and gone through the company’s entire data infrastructure.

Well this is quite the eye opener. Thanks for sharing. Can I ask what the original website is though? Why is it down?

I'm not sure what you're talking about.

Why would anybody need to build a city of 60,000 engineers to compete in 5G? Europe's leading 5G makers are not doing that so that they can compete with Huawei, because it's obviously entirely unnecessary.

The US doesn't need to change anything to compete with China. It has been successfully out-competing China in nearly every field for decades, save for low value manufacturing. China poses no greater competitive threat in the middle and upper tiers of economic competition than Western Europe does (presently far less in fact). The US also didn't need to entirely alter itself to compete with Western Europe.

> the US has to finally confront the structural reasons why they have become so uncompetitive in electronic hardware in relation to East Asia

No it doesn't need to do that at all. The US leads the world by a large margin when it comes to the semiconductor industry - the most important components of electronics today. Manufacturing electronic hardware is a low value economic segment, which is why it's outsourced. It can be pushed from China to a dozen other countries instead (see Foxconn's statement that they're prepared to move Apple's manufacturing out of China any time, that's how weak China's value proposition really is). Samsung - the world's leading phone maker - has already done that, moving a lot of their phone manufacturing to Vietnam.

Agreed. There’s a reason the most educated and capable Chinese move the the US and become Americans. America’s cultural and technological dominance comes from its flexibility borne from a willingness to take in hard working immigrants from anywhere. America is exceptional in that it is a country of immigrants.

Yep it’s called brain drain. Many people come to the US to pursue school with intentions to go back home and make things better there, but just fall into life and work and never look back.

Or just find the opportunities better/easy than trying the same back home.

Wait, why are we in a race to get to 5G? Why are we in a competition with China over 5G? This is nothing but spin, and this kind of talk was probably originated by the telcos themselves, who benefit from this sort of high pressure tactic to cut regulation and receive major subsidies. Not my original idea, but it has been a great question to ask.

https://www.theverge.com/platform/amp/2019/5/23/18637213/5g-...

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