T-Mobile US and Sprint have spent the better part of the last two years hoping and planning to merge into a combined entity, but now that the outcome of that effort rests with a federal judge, the future of both companies is unclear. If the merger is blocked and the operators remain separate companies, their respective 5G plans are going to evolve considerably and quickly.
“T-Mobile is in a more favorable position than Sprint” because it enjoys a stronger balance sheet and the wherewithal to push forward with 5G, said Lynnette Luna, principal analyst at GlobalData Technology. “However, T-Mobile will then be relegated to deploying 5G in low-band and [millimeter-wave] spectrum, and would need to acquire mid-band spectrum that is now seen as the Holy Grail of 5G deployments given its propagation capabilities and faster data speeds.”
Meanwhile, if the companies don’t merge, Sprint will still be “attractive in that it has a large amount of mid-band spectrum — something no other U.S. operator has — but it doesn’t have the capital to roll that out nationwide,” Luna said. “[Sprint] has been in a holding pattern with those initial cities until the deal goes through. If Sprint had the funds, it would have a nice advantage in 5G as it would have widespread deployments of mid-band 5G.”
Until recently and despite having launched 5G in only nine cities, Sprint had the most robust 5G network in the country. That early lead evaporated when T-Mobile lit up a “nationwide” 5G network last month running on its 600 MHz spectrum.
T-Mobile US will continue to expand its 5G deployment on 600 MHz spectrum, which will achieve extensive coverage but relatively lower speeds compared to 5G networks riding on mid-band or millimeter-wave (mmWave) spectrum, according to Steve Vachon, analyst at Technology Business Research.
To its credit, Sprint has been relatively forthright about its dire market position and repeatedly warned regulators and analysts that the company’s outlook will be even more grim if it doesn’t merge with T-Mobile. The company has lost at least $25 billion since 2010.
“Debt is such a headwind for them, and while they’ve built out some initial 5G markets with their 2.5 [GHz spectrum], it won’t cover the entire country. In order to provide the broadest footprint, [Sprint] will need capital as well as partners” who have access to spectrum to further expand its 5G network, William Ho, principal analyst at 556 Ventures.
Sprint has “been a laggard in the market for years,” Vachon said. T-Mobile isn’t “getting very much from Sprint except their customer base” and 2.5 GHz spectrum holdings, he added.
All Eyes on 5G Spectrum
“If the merger doesn’t go through, it’s really going to be more of an emphasis on the upcoming auctions,” and T-Mobile will be more aggressively bidding for spectrum, Vachon said.
The FCC’s planned C-band auction will be of particular interest because the agency plans to auction 280 MHz of spectrum between 3.7 and 4.2 GHz later this year. Moreover, if the merger doesn’t go through Sprint could also decide to sell or lease some of its 2.5 GHz spectrum to T-Mobile, Ho said.
“They’ll have to acquire more spectrum as they are doing now in the mmWave auctions as well as the future C-band effort for mid-band 5G,” he said. T-Mobile is “addressing coverage with its low-band assets but they need to be adding as much as they can in addressing their core urban centers for capacity.”
Cloudy IoT, SDN Prospects
While the accumulation of spectrum and customers would be the most obvious and immediate benefit for both companies, IoT is another area of strength for Sprint. The operator’s IoT strategy is “robust” and that could help T-Mobile gain traction among enterprises, Vachon said.
“Without Sprint, [T-Mobile’s] enterprise side will need to develop from scratch to compete with the more sophisticated services and products AT&T and Verizon offer,” Ho said. “Sprint has that ability and it’s probably why, in a new T-Mobile, the Sprint enterprise group would lead that charge with a more robust network story than just standalone Sprint.”
Sprint and T-Mobile have also been relatively quiet about efforts to virtualize the network and introduce more SDN. It’s unclear how those strategies might evolve if the companies remain separate, but both operators would surely face more questions considering how much emphasis and investment AT&T and Verizon have placed in network virtualization.
“Every operator should be looking at a software-centric solution,” Ho said, adding that open radio access network technology is the prime example. “Conceptually, it’s a capex spend savior to some extent, but it’ll take the early adopters to iron out the kinks before bigger competitors readily adopt. Carrier trials will usually provide the operators’ technical teams the confidence to move to those solutions.”
As for the outcome of the merger, predictions expectedly cover both ends of the spectrum. While some analysts’ predictions have been reinforced, others have changed their tune based on the questions asked during the trial that was forced by a group of state attorneys general that are trying to block the merger. The trial concluded earlier this month, and U.S. District Judge Victor Marrero of the Southern District of New York said he would render his verdict “as promptly as possible.”
Luna believes the decision will largely come down to whether Dish Network is viewed as a viable fourth nationwide operator of 5G services. The complex deal reached with the Department of Justice (DoJ) in July 2019 calls for the combined company to divest assets to Dish for that effort at a cost of $5 billion.
“I’m leaning more toward yes than no. I think the federal backing is going to help with this decision,” Vachon said, noting that the DoJ and Federal Communications Commission already reached agreements with the companies and signed off on the transaction.
Vachon is convinced that the merger is beneficial for competition. T-Mobile US will remain a disruptive player in the market, regardless of the outcome, and Sprint “hasn’t been very much of a threat” and if it were to leave the market it wouldn’t have much of an impact on T-Mobile’s strategy, he said.