Sprint, T-Mobile talk up lower prices from their deal. Is it a promise they can keep?

Sprint and T-Mobile have reached an agreement to merge

Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.
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Sprint CEO Marcelo Claure and T-Mobile CEO John Legere announce that the two companies have reached an agreement to come together to form a new company - one that will deliver the first 5G nationwide network.



"Lower prices."

Those phrases were repeated on Sunday by Sprint chief executive Marcelo Claure and T-Mobile chief executive John Legere as they sought to reassure consumers — and regulators — that a combination of the two wireless companies would result in lower pricing than their competitors.

Both men seemed mindful that federal antitrust regulators and the broader public are reluctant to accept the idea that reducing the wireless industry from four major companies to three will benefit consumers, a key criterion for the deal receiving regulatory approval.

The Trump administration, widely considered to have embraced a business-friendly approach, has also sued to block a proposed $85 billion deal by AT&T to buy Time Warner.

"This is good for consumers, it's good for the economy, and it's good for our country," Claure said on a call with analysts shortly after T-Mobile announced it would merge with Sprint.

With the news of Sprint merging with T-Mobile, here are some ways it could affect consumers.

The $26.8 billion deal would combine two companies that have sought to keep pace in the wireless business by undercutting service rates offered by AT&T and Verizon, the dominant companies in the industry.

T-Mobile executives talked about $6 billion in cost reductions in the combined company.

"We'll do those even while offering prices well below the competition," said T-Mobile chief financial officer J. Braxton Carter on Sunday.

That may be easier said than done.

"For the last several years, the wireless industry has been highly competitive, and I think this merger would mark a step away from that," said Jeff Moore, principal at Wave7 Research, which analyzes the wireless industry. "I think the pricing would be somewhat higher because of the dynamic of having three carriers."

Some analysts have signaled that mergers in the wireless business will lead to "market repair," which is to say that consolidation in the industry will cool the motivation for carriers to undercut one another on rates and instead benefit investors with higher profits.

Even so, Legere said on Sunday that he felt confident that regulators would approve the deal and its "compelling benefits."

Legere suggested that wireless competition is increasing as Comcast and other cable companies enter the market. But cable companies operate largely where they already offer cable service, whereas the big four wireless carriers can offer service most anywhere. Also, the cable companies don't have wireless networks of their own; they use the networks belonging to the major carriers.

Combining T-Mobile and Sprint could also result in a combination of each company's prepaid wireless brands, Metro PCS and Boost Mobile. Merging those two brands could result in higher prepaid fees.

"That would be a negative in the prepaid space, arguably more than the postpaid space," Moore said.

Already, there were signs that negotiations between Sprint and T-Mobile would lead to some consumer benefits.

Sunday's announcement revealed a wireless agreement for Sprint customers to use T-Mobile's signal if customers are out of range on their existing network.

T-Mobile's merger with Sprint is not expected to close until the first half of 2019 and could be delayed beyond that if the Justice Department sues to block the deal.

That waiting period could be a good one for consumers. Berge Ayvazian, a senior analyst at Wireless 20/20, said Sprint has been offering retention deals to existing customers and suggested that Sprint customers should see which carrier offers the better deal before a merger closes.

About 20 million Sprint customers own phones that are already compatible with the T-Mobile network. The combined company would have about 127 million subscribers.

If approved, T-Mobile would look to merge Sprint customers to its network within three years, according to T-Mobile chief operating officer Mike Sievert.

Here's a timeline outlining Sprint's on-again, off-again merger talks since 2014. On April 29, 2018 Sprint and T-Mobile announced the two were merging.