Possible Sprint-T-Mobile Deal Could Be Another Nextel Disaster
Enterprises Using Either Provider Should Remain Alert
As the Trump administration continues to roll out, rumblings of movements and shakeups among telecom service providers are beginning to take place. One possible union reported by Reuters and storming through the sector – a tie-up between Sprint and T-Mobile. While Sprint has gone to great lengths in recent years to serve enterprises with mobility and network connectivity and infrastructure, few overall likely would feel a direct impact if this merger does materialize. Still, the effects on the industry could be felt by all.
In February, news emerged that the parent companies of Sprint and T-Mobile – Japan’s Softbank and Germany’s Deutsche Telekom, respectively – once again want to try to bring their U.S.-based wireless carriers together. In 2014, Soft-bank offered $32 billion for T-Mobile, a deal shot down by the Obama administration’s Department of Justice. Now, though, circumstances could change. Late last year, Softbank president Masayoshi Son met with President-Elect Trump and emerged from the conference “with a big grin on his face,” according to PC Magazine.
Of course, that in itself does not signify a done deal but when Sprint-T-Mobile talk revived this past month, the pieces started fitting. Keep in mind that neither Sprint nor T-Mobile legally can approach one another until April. That’s when the FCC’s latest wireless spectrum auction will have wrapped, assignments and all; providers are not allowed to hold merger discussions when they are both vying for airwaves.
From a strategic standpoint, Sprint could gain a lot from this merger. While it operates on a CDMA network, like Verizon, T-Mobile uses GSM, like AT&T. Most of the world runs on a GSM network, mandated throughout Europe in the late 1980s. This would give Sprint, the fourth-largest wireless carrier, some much-needed strength in the U.S. market, and somewhat internationally.
But Sprint investors may need to beware, recalling the company’s disastrous Nextel merger of 2005. As a T-Mobile combination would do, this merger saw two companies operating on different networks attempting to unite. Nextel used the once-popular iDen technology, most often found in the transportation and logistics industries. When these two providers attempted to become one, cultural, not just technological, disparities began to halt progress, said Stephen Farinelli, director of business development, vendor practice, at AOTMP.
“Nextel was always viewed as an entrepreneurial and free-spirited company with a focus on customer support, while Sprint has long been viewed as a bureaucracy with industry-worst customer service,” Farinelli said.
These variances impacted the performance of both vendors. Working from separate headquarters, Nextel staff was often required to receive Sprint approval on projects they weren’t equipped to handle. Subsequently, Nextel saw an employee exodus, and Sprint decommissioned the iDen platform eight years later. The Sprint-Nextel merger was “easily one of the industry’s worst marriages,” Farinelli said, echoing long-held industry sentiment.
A Sprint-T-Mobile deal also could see cultural and managerial clashes. But what adds fuel to the fire this time is the contentious relationship between T-Mobile CEO John Legere and Sprint CEO Marcelo Claure. Anyone who follows either of these men on Twitter can read their contempt toward one another – Claure has referred to T-Mobile and its plans as “crappy,” while Legere called Sprint’s All In plan “a swing and a miss.”
Beyond the drama, though, what would this rumored pairing mean for the enterprise? For the many organizations that use Verizon or AT&T, the effects of this partnership would be negligible. For those working with either Sprint or T-Mobile, Farinelli would expect a stressed workforce as employees grappled with the probable fall-out, including layoffs, re-origination, salary adjustments and relocations. In addition, the stress could impact customer satisfaction, quality of service and innovation for both vendors.
“An enterprise client can be prepared by first acknowledging that change is forthcoming,” Farinelli said. So, if Sprint and T-Mobile make an announcement, what would enterprises do to protect their interests? If locked into a contract, maintain a dedicated and educated internal headcount. This would help in navigating the uncertainties of the merger as Sprint and T-Mobile identified areas in which to cut costs. However, if an enterprise had no long-term contracts with either vendor, it would want to consider shopping around at AT&T or Verizon. If a Sprint-T-Mobile union comes about, Farinelli predicts AT&T and Verizon will extend aggressive offers to enterprises as fear, uncertainty and doubt run rampant.