The word “disastrous” comes to mind, but that description really is unacceptable, given the actual human disasters wrought by back-to-back Category 5 hurricanes and a devastating earthquake in Mexico.
When referring to the almost-certain merger of Sprint with one of its three telecom competitors, T-Mobile, another word must be used. How about tragic? It would, indeed, be tragic for metropolitan Kansas City – especially Johnson County – to lose one of the area’s largest employers.
As I said in a May column, two leading local economists told me a Sprint merger with anyone, let alone T-Mobile, would be a “significant blow” and have a “widespread impact” on the local economy. The financial loss to the metropolitan area could exceed $1 billion, according to Frank Lenk, Director of Research Services for the Mid-America Regional Council.
The personal impact would be especially painful for the 6,000 employees at the Sprint world headquarters campus in Overland Park, as well as the thousands of local businesses that greatly depend on Sprint as their major customer. The loss would not only be economic. Losing Sprint would also mean the loss of the company’s significant civic and philanthropic leadership.
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The widely reported likely merger is supposed to be announced in late October. It will be made crystal clear that, like any marriage, the two will become one. But in this case, there is no question as to which one. Reportedly, T-Mobile’s board will have all the control, and its CEO will be in charge. Sprint’s team, including its leadership, does not appear likely to be a part of the merged company.
Sadly, there seems to be no way this merger can be gradual for the Sprint employees in Overland Park. T-Mobile would attempt, like any publicly owned company, to immediately maximize value for its shareholders. That pressure to enhance the bottom line quickly often translates into an almost instant bloodbath as redundant employees are eliminated.
T-Mobile does not need another headquarters or even some satellite campus. It already has two headquarters facilities. One is for its parent Deutsche Telekom in Bonn, Germany. The domestic headquarters are in Bellevue, Washington, a suburb of Seattle. That makes the Overland Park world headquarters for Sprint extra baggage that probably would be put up for sale almost immediately. It is possible, though highly unlikely, that T-Mobile could keep the Overland Park campus as an investment and lease the vacant space to outside tenants, as Sprint has done since it shrank from a peak of 14,000 employees. Far more likely is that T-Mobile would sell the prime real estate and use the cash to pay down debt.
Unfortunately, nearly all of the Overland Park Sprint employees would be as redundant as the campus itself. T-Mobile already has its own executive leadership, its own marketing, operational, legal, accounting and other employees doing virtually all the same things that are done here.
The top executives at T-Mobile probably believe their existing talent can absorb the millions of new customers and, thus, take on the Sprint workload by adding only a tiny fraction of former Sprint employees.
With the tragic loss of so many Sprint employees earning $100,000-a-year or more, the value of homes in higher price brackets — especially in Johnson County — would take a substantial hit almost overnight. Commercial leasing rates would tumble as the soon-to-be available thousands of square feet on the Sprint campus saturated the office market. The outlook is dismal for all those who indirectly rely on Sprint, and there are plenty of those, particularly in Johnson County.
What we know for certain, if the merger occurs as expected, is that thousands of our neighbors will suddenly lose their jobs, which, in turn, will adversely impact thousands more. There is no question losing Sprint would be an economic tragedy on a scale unlike anything this community has ever experienced.