As Sprint speeds towards a $26.5 billion merger with T-Mobile — the Justice Department on Friday confirmed its approval of the deal — the question in Kansas City lingers: Will the combined company sustain a significant presence in Overland Park?
Local leaders remain bullish on the new T-Mobile, believing it will keep its promise to maintain a strong employment base here.
“Both companies have made publicly clear that they plan to utilize Overland Park and the surrounding Kansas City communities, and as a member of the Senate Commerce Committee, I will closely monitor these developments beyond this announcement,” said Sen. Jerry Moran, R-Kansas.
But industry experts, leaning on lessons learned from previous corporate mergers, don’t put much stock into T-Mobile’s pledge.
“I think there’s no realistic expectation that Sprint will maintain a major presence in Kansas City once the Sprint/T-Mobile deal closes,” said Jeff Moore, principal with wireless industry research firm Wave7 Research.
Approval from the Justice Department and the Federal Communications Commission puts the merger closer to the finish line. But it’s still unclear whether an antitrust lawsuit filed by several state attorneys general might scuttle the deal.
If the merger is finalized, the combined company will retain the T-Mobile brand, meaning that the Sprint brand, one of Kansas City’s largest and most visible corporations, will fade away.
In a statement Friday, Kansas Attorney General Derek Schmidt said he was comfortable with assurances from both companies about their commitment to Kansas.
“I am convinced it will benefit Kansas consumers by increasing competition in our state, expanding quality coverage in many rural areas of Kansas, expediting the deployment of 5G technology for Kansans, and protecting and expanding Kansas jobs,” he said.
Both companies believe the merger was the only way either one could compete with its larger rivals. Job losses are likely in most mergers that seek to find cost savings. But T-Mobile, which is based in suburban Seattle, has pledged to keep a secondary headquarters in Overland Park following the merger.
“We’ve long understood that to have a productive and bright path forward that the trajectory needed to change for Sprint,” said Tracey Osborne Oltjen, president and CEO of the Overland Park Chamber of Commerce. “So the combined T-mobile and Sprint appears to be the best foot forward for this region.”
Both the local chamber and the Kansas City Area Development Council worked to convince T-Mobile on the merits of keeping a local employment base.
Osborne Oltjen said the Overland Park campus touts more than just a physical footprint: it’s home to valuable human capital that will help the new company build out its 5G network.
“I do take them at their word that there is an asset here that is extremely valuable to them,” she said. “I think we have an important role to play in this new company as they move forward.”
Ryan Weber, president of the KC Tech Council, said T-Mobile is unlikely to walk away from the expertise that has amassed in Overland Park.
“Talent is the currency of the tech industry,” he said. “Telecommunications is a bedrock of our tech industry here and it would be foolish almost to move those workers or to try to relocate those workers because they’re all right here.”
Close followers of Sprint and its history will recall the last time the company split its headquarters. That was in the aftermath of the 2005 Sprint merger with Nextel. Sprint kept a corporate headquarters in Reston, Virginia, while the operations headquarters remained in Overland Park. By 2008, the headquarters was designated in Overland Park, where the company in 2001 opened a large corporate campus near 119th Street and Nall Avenue.
The Kansas City region may not get as lucky this time around.
“Realistically, you have to expect that Kansas City will have the same fate as Reston had,” said Roger Entner, lead analyst with wireless research firm Recon Analytics. “The question is how quickly it will happen.”
Few corporations have kept up dual headquarters for long with a degree of success. Unilever has managed to keep headquarters offices in London and Rotterdam, Netherlands. Even that arrangement has come under strain as the United Kingdom prepares to leave the European Union.
Another proclamation from corporate leaders in the run-up to the Sprint merger with T-Mobile: Big savings from efficiencies.
“All these billions of dollars of efficiency gains have to come from somewhere and it’s not all going to come from squeezing suppliers even more,” Entner said. “You only need one marketing department, you will only need one network department.”
Jide Wintoki, a professor of finance at the University of Kansas School of Business, said Sprint’s position is weakened because it’s being gobbled up by a larger competitor. In previous mergers, the larger company has often absorbed duplicate functions and prioritized its own employment base.
But Kansas City has a major advantage moving forward: the cost of living here is substantially lower than on the West Coast. That may push T-Mobile to maintain larger numbers of workers here, he said.
While the merger raises uncertainty about Kansas City, Wintoki said investors have made up their mind on the deal: Stock prices for both Sprint and T-Mobile shot up this week after reports emerged that the Justice Department would approve the union.
“Market participants think this is a good thing for the shareholders,” Wintoki said. “It may not necessarily be a good thing for the employees and the locations these employees are at, but they think it’s a good thing for shareholders.”
There’s no question that the merger represents a major shift for one of Kansas City’s most iconic firms.
“We were riding high for a long time,” said Dan Wilinsky, who worked on Sprint’s communications team for a decade. “I don’t think it had to be like this. I think Sprint lost its way.”
In recent years, he said, the company fell behind on costumer service, device adoption and network capabilities. But it wasn’t always that way: he recalled vividly the day the company unveiled its first flip phone that could connect to the internet.
“Imagine sitting in a room never having seen a web phone before. We had the first one,” he said. “It took about two minutes to load. But you saw that website on your phone and it was like watching man land on the moon.”
He thinks the merger will drive up consumer prices and he predicts T-Mobile will slowly abandon the Overland Park campus. For the employees, Wilinsky said they at least have some clarity on the company’s future.
“You kept hearing stories about mergers and acquisitions for years,” he said. “Maybe it’s a little sense of relief that at least there’s a finish line. Maybe there’s a sense of finality.”
Once the Sprint brand fades away, it’s likely that the name of Kansas City’s premiere arena will also need a change.
The wireless company partly funded the 2004 campaign to gain voter approval for a downtown arena and its marketing officials worked alongside the political team pushing the project.
In 2007, Sprint signed a 25-year naming rights agreement on the Sprint Center. That agreement does allow for a name change.
The company’s longtime corporate headquarters in Overland Park has already changed hands.
Sprint recently sold the 190-acre campus near 119th and Nall to Wichita’s Occidental Management for $250.9 million.
Currently, about 6,000 Sprint employees work in Overland Park, plus another 1,500 contractors. That’s about half the number of employees that the campus was designed for when it opened 18 years ago.
As part of the real estate sale, Sprint signed a 10-year lease to occupy four buildings on the campus, according to an analysis by investment research firm Moody’s. The agreement does not include an option to cancel, but does allow Sprint to take over more space if it chooses.
The transaction has assured local leaders that even if the wireless provider were to pull up stakes, the sprawling campus would remain well tended.
In 2004, Occidental Management purchased the former Overland Park International Trade Center out of foreclosure. It sits less than a mile away from the Sprint campus. Occidental rebranded the trade center as Overland Park XChange, opening up 733,000 square feet of new Class A office space. It’s now home to firms like UnitedHealth Group’s OptumRx, Black & Veatch and SelectQuote.
Like that project, Occidental has pledged to invest in improving the Sprint campus.
“I’m really excited about the future of that real estate,” said Osborne Oltjen with the local chamber. “I have no doubt that five years from now, 10 years from now, this campus is going to be a shining example of the new workplace.”
Sprint has pledged to spend $25 million upgrading its own offices on campus.
The company just unveiled a total revamp of the main executive building completed by WeWork, a company known for creating hip, urban coworking spaces for freelancers and entrepreneurs. Japan’s SoftBank Group, the majority owner of Sprint, also owns a stake in WeWork.
Moody’s revealed that WeWork plans to lease 187,772 square feet of office space on the campus. A lease has not been finalized and the company declined to comment on its plans for the site.
In late June, Deeanne King, Sprint’s chief human resources officer, said T-Mobile was running out of space at its Washington state headquarters and had been supportive of Sprint’s efforts to reinvest in the Overland Park campus.
“So I do think it makes a statement about Sprint’s commitment to Kansas City and or the new company,” she said.