T-Mobile, Sprint announce merger to create 'mother of all 5G networks'

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Sprint CEO Marcelo Claure (l.) and T-Mobile CEO John Legere.
Sprint CEO Marcelo Claure (l.) and T-Mobile CEO John Legere. Credit: Sprint, T-Mobile

T-Mobile agreed Sunday to acquire rival Sprint for $26 billion, a move that both CEOs say will accelerate deployment of 5G technology, lower prices for consumers and create new jobs.

The combined company, which will be called T-Mobile, will be valued at $146 billion including debt. John Legere, current president and CEO of T-Mobile, will serve as chief executive of the new company. Sprint's current CEO, Marcelo Claure, will serve on the board of the new venture.

Both companies will operate independently until the deal receives approval from regulators, which the companies say they anticipate will come during the first half of 2019. Legere frequently refers to competitors AT&T and Verizon as "the duopoly." He argued Sunday that combining Sprint and T-Mobile will benefit consumers.

The fifth generation of mobile tech, more commonly known as 5G, is critical for technologies such as augmented reality, autonomous cars, virtual reality and connected devices, or IoT. During a conference call with reporters and analysts, Legere said they will invest $40 billion over the next three years rolling out 5G.

"We will have such a large impact that it will cause AT&T, Comcast and Verizon, who are under-investing in 5G, to respond and invest more," Legere said. "The U.S. is behind China in being a leader on 5G. We can't let that happen—we need to respond together and we think we can drag the rest of the players with us even if they're kicking and screaming."

Last year, T-Mobile created a video about what augmented reality could look like come 2020. In it, a bicyclist avoids a crash after a virtual heads-up display alerts him that an SUV is approaching fast from behind. A different man is able to virtually try on clothes while shopping at a store.

Such ideas cannot come to fruition with 4G, which is incapable of delivering fast enough speeds to make the experiences worthwhile. The fifth generation of mobile tech, however, is 1,000 times faster, and built to handle the imminent increase of connected devices, which are expected to number 29 billion come 2020, according to Ericsson.

Faster speeds and lower latency will also be critical for autonomous cars, which must make near-instant decisions should a kick dart out onto the street. (Latency describes how long it takes for two devices to speak to one another.)

Neither CEO addressed how the new company will handle marketing moving forward, but T-Legere said he will "continue the Un-Carrier vision." Publicis Seattle has been T-Mobile's agency of record for more than a decade, and helped create the "Un-Carrier" campaign. Sprint, meanwhile, has an in-house agency, but also works with Droga5 and Horizon Media.

T-Mobile U.S. reported ad spending of $1.8 billion in 2017 (4.4 percent of total revenue), up from $1.7 billion in 2016 (4.5 percent of revenue). Sprint reported ad spending of $1.1 billion in the year ended March 2017 (3.3 percent of revenue). Sprint hasn't yet disclosed ad spending for year ended March 2018.

AT&T disclosed ad expenses of $3.8 billion in 2017 (2.3 percent of revenue), including spending on the DirecTV brand. Verizon Communications reported ad costs of $2.6 billion in 2017 (2.1 percent of revenue).

Telecoms are among the nation's most-advertised brands. Verizon ranked as the No. 2 advertised brand in 2016, according to Ad Age Datacenter. The AT&T brand was No. 4; T-Mobile, No. 9; and Sprint, No. 12.

Respectively, T-Mobile and Sprint are the third and fourth largest carriers in the U.S., with a market share of 19 percent and 12 percent, according to GSMA Intelligence, a data and analytics company with a focus on mobile. Verizon, meanwhile, is the market leader with 36 percent, followed by AT&T (30 percent).

"This combination will create a fierce competitor with the network scale to deliver more for consumers and businesses in the form of lower prices, more innovation, and a second-to-none network experience—and do it all so much faster than either company could on its own," Legere said. "As industry lines blur and we enter the 5G era, consumers and businesses need a company with the disruptive culture and capabilities to force positive change on their behalf."

–Contributing: Bradley Johnson

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