Talks between Sprint and T-Mobile about a possible acquisition have ceased, according to an unnamed source. Heads of both companies have met with Federal Communications Commission Chair Tom Wheeler in recent months and it is believed that the deal was called off because of fears that it would be blocked by the FCC, antitrust regulators, and the US Judiciary. This news shouldn’t come as a surprise to anyone. In 2011, AT&T made an attempt to acquire T-Mobile but this move was blocked by the US Antitrust regulators because they believed it would unfairly drive up prices across the industry which would negatively affect consumers.
Sprint and T-Mobile are the third and fourth largest cell phone providers in the United States, and many have argued that a possible merger or acquisition would reduce competition, increase prices, and decrease innovation because of less competition in the industry. Though, in defense of the two companies, if they were to combine they still would not have a third of the US market share or be as large as the two industry giants, Verizon and AT&T.
As a result of Sprint's failed business deal, they have hired a new CEO and President, Marcelo Claure to replace current CEO, Daniel Hesse. Claure, 43, was the founder and CEO of Brightstar Corporation, a wireless telecommunications company. He founded Brightstar in 1997, and has since grown the company to gaining $10.5 billion in revenue in 2013, and providing services in over 125 countries. SoftBank Corporation, the Japanese telecom company that owns a majority stake in Sprint, bought a majority stake in Claure's company in 2013.
Claure is known as an ambitious and tenacious leader, with a track record of making aggressive business decisions to disrupt the status quo, something that Sprint could certainly use today to gain back market share. For the past few years Sprint has not only consistently lost users, but also their network infrastructure has been falling apart. They went from being the first US wireless company to have a 4G capable phone to being the last major wireless company to have a 4G network that the phone could operate on. They are being undercut in prices by competitors at the bottom and outperformed with superior coverage competitors at the top like Verizon and AT&T.
The combination of Sprint's deal with T-Mobile falling through and Sprint hiring a new CEO should be good news for the consumer. By keeping the third and fourth largest cell phone providers in the US independent, it keeps competiton up which will generate lower prices and better products. In regards to Mr. Claure, he will certainly be looking to make improvements with Sprint as soon as possible. This should result in dramatically upgrading Sprint's infrastructure and implementing a new business strategy to bring back customers, i.e. competitive service plans and great promotions. Even if you're not looking to change your service to Sprint, you will benefit from this. The threat of customers leaving their current providers alone will result in a price-war between all the service providers in an effort to maintain market share. Today is a good day to be a consumer in the US wireless telecom industry, we just have to wait and see how good.
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