T-Mobile – Sprint Merger
link to page 1 
June 26, 2018
T-Mobile – Sprint Merger
On April 29, 2018, T-Mobile US and Sprint Corporation
decline is attributable to several factors. There is little
announced a merger agreement that could change
growth in the number of lines, as the vast majority of
competitive conditions within the telecommunications
potential users already have mobile phones. Many carriers’
industries. T-Mobile is valuing Sprint at approximately $59
service plans no longer include two-year contracts in
billion. The companies compete directly with one another
conjunction with subsidized smartphones, so customers can
in the mobile wireless voice and data services sectors for
terminate service without penalty if a competing provider
both residential and business customers. In addition, the
offers lower service fees. Carriers have generally revised
companies claim, the merger would enable them to compete
their service plans to offer more data usage for the same
directly with traditional in-home wireline broadband
amount, or less, than previously. Also, the proliferation of
services.
public Wireless Fidelity (Wi-Fi) services has enabled
mobile phone users to bypass their carriers’ mobile wireless
The Two Companies
networks, thereby limiting mobile carriers’ revenue.
T-Mobile
Figure 1. Service Revenues of Mobile Carriers
T-Mobile is the third-largest wireless carrier in the United
(dol ars in bil ions)
States, serving about 72.6 million customers under the T-
Mobile and Metro PCS brands. It is controlled by Deutsche
Telekom AG, which indirectly holds about 62% of T-
Mobile’s stock. Deutsche Telekom is based in Bonn,
Germany, and provides fixed broadband and wireless
services to customers in more than 50 countries.
Sprint
Sprint is the fourth-largest wireless carrier in the United
States, serving approximately 54.6 million retail and
wholesale wireless customers at the end of 2017 under its
Sprint, Boost Mobile, Virgin Mobile, and Assurance
Wireless brands. In addition, Sprint provides long-distance
voice services to other telecommunications companies and
select businesses over its landlines. Sprint also provides
Source: FCC 19th and 20th Mobile Wireless Competition Reports,
part of the backbone of the internet. As a Tier 1 internet
citing data from UBS Investment Research.
backbone provider, it can reach every other network on the
Notes: Revenues not adjusted for inflation. The decline in the share
internet without paying other companies to carry or transfer
of “Others” reflects industry consolidation.
data. Other Tier 1 internet backbone providers within the
United States include AT&T, Verizon, and Century Link.
Regulatory Review
Before the companies may complete the merger, three
Sprint is controlled by SoftBank Group Corp., which
indirectly holds about 84% of Sprint’s stock. SoftBank is
government entities must review it: (1) the FCC, (2) the
U.S. Department of Justice (DOJ), and (3) the Committee
based in Tokyo, Japan, and provides mobile and fixed-line
on Foreign Investment in the United States (CFIUS).
services in Japan. If the transaction is completed, Softbank
would join Deutsche Telekom as a major holder of T-
Mobile’s shares.
The FCC evaluates whether the transaction would be in the
public interest, pursuant to sections 214(a) and 310(d) of
Consumer and Industry Trends
the 1934 Communications Act, as amended. The FCC may
approve the merger without conditions, approve the merger
Four national carriers handle almost all mobile wireless
with conditions, or designate the merger for a hearing by an
traffic in the United States: AT&T Inc.; Verizon
FCC administrative law judge.
Communications Inc.; T-Mobile; and Sprint. The Federal
Communications Commission (FCC) estimates that these
four carriers accounted for about 98% of the nation’s
DOJ reviews the transaction to determine whether it would
substantially reduce competition, as prohibited by Section 7
mobile wireless service revenue in 2016.
of the Clayton Antitrust Act of 1914. DOJ may allow the
deal to go forward unchallenged, enter into a negotiated
Mobile wireless companies generate revenue from selling
consent agreement with the companies, or seek to stop the
mobile and data services and equipment, such as mobile
transaction by filing for a preliminary injunction in federal
phones and tablets. As Figure 1 illustrates, U.S. mobile
court.
wireless service revenues peaked in 2014. The revenue
https://crsreports.congress.gov
link to page 1 link to page 2 T-Mobile – Sprint Merger
CFIUS is an interagency committee that reviews foreign
distinct from the telecommunications market as defined in
investments in the United States to determine whether they
some other way, then they would assess the merger’s
threaten to impair national security or would result in
competitive impact, in part, by measuring the concentration
foreign control of critical infrastructure that could impair
of the industry before and after the merger.
national security. The President may block foreign
investment transactions that threaten to impair national
Antitrust authorities often use the Herfindahl-Hirschman
security. Alternatively, CFIUS may clear a transaction
Index (HHI) to measure how a merger could affect market
subject to conditions designed to mitigate the perceived
structure. The HHI is calculated by squaring the market
risks to U.S. national security the transaction otherwise
share of each firm competing in the product market and
would pose, or may take no action and thereby allow a
then summing the resulting numbers. This formula gives
transaction to proceed as proposed.
proportionately greater weight to larger market shares. For
communications companies, market shares can be measured
Potential Issues for Regulatory Review
by revenue or number of subscribers.
Within the last 10 years, T-Mobile has twice considered
merging with another mobile wireless carrier. Each time,
Based on 2016 revenue data described in Figure 1, the HHI
regulators indicated that they would seek to prevent the
of the mobile wireless industry was 2845 points. Post-
transaction out of concern that it would reduce competition.
merger, the HHI would be 3256. Thus, the increase would
be 410 points. According to the 2010 merger guidelines
In 2011, after AT&T announced its intention to acquire T-
published by DOJ and the Federal Trade Commission,
Mobile from Deutsche Telekom, DOJ announced that it
markets with HHIs above 2500 are highly concentrated, and
intended to seek to block the acquisition. In a press release,
mergers in highly concentrated markets that involve an
DOJ stated that the proposed acquisition would
increase of more than 200 points will be presumed to be
substantially lessen competition for mobile wireless
likely to enhance market power. Thus, if DOJ were to
communications in the United States. AT&T ended the
define mobile wireless as a separate market, it would likely
takeover attempt and paid Deutsche Telekom a break-up fee
presume that the proposed merger would give AT&T and
that included $3 billion in cash and spectrum valued at
Verizon as well as the merged T-Mobile-Sprint greater
about $1 billion. The fee enabled T-Mobile to offer
pricing power. The parties may rebut DOJ’s presumption
innovative features at lower prices and thereby gain market
by providing persuasive evidence that demonstrates the
share.
contrary.
More recently, Sprint and T-Mobile abandoned merger
Competitive Impact on Pre-Paid Customers. Wireless
discussions in 2014 after the FCC and DOJ suggested that
carriers serve two types of retail customers: postpaid and
the combination of the nation’s third- and fourth-largest
prepaid. Postpaid customers are billed monthly, after
mobile wireless carriers could lead to higher prices and
service has been provided. Prepaid customers pay in
fewer choices, particularly for consumers who are not able
advance of receiving services. Prepaid subscribers may lack
or willing to spend large amounts of money.
the credit background or income necessary to qualify for
postpaid services. Based on the data in Table 1, the HHI of
Defining the Relevant Product/Service Market. Since
the prepaid subscriber mobile wireless submarket is
those earlier merger efforts were blocked, the
currently 2686. Post-merger, the HHI would be 3902, with
telecommunications market has undergone significant
a change of 1216. Under the merger guidelines, DOJ would
change. As part of their reviews, the agencies must examine
presume the merger would likely enhance carriers’ market
the businesses of T-Mobile and Sprint both in terms of what
power in this segment of the market.
they sell (a product/service dimension), and where they sell
it (a geographic dimension). The companies have stated that
Table 1. Carrier Market Shares by Subscriber Type
they are increasingly competing with other service
As of March 31, 2018
providers as wireless, cable, satellite, and content-related
services converge. Regulators will need to determine
Postpaid Subscribers
Prepaid Subscribers
whether the relevant market for analysis is mobile wireless
T-Mobile
14%
38%
service only, or whether the convergence of previously
separate telecommunications services requires them to
Sprint
11%
16%
define the market in a different way.
AT&T
27%
29%
For example, since 2017 AT&T has expanded by acquiring
Verizon
39%
9%
DIRECTV, a satellite video subscriptions service, and Time
Warner Inc., which owns cable networks, a television
Others
8%
8%
studio, and a movie studio. AT&T has launched WatchTV,
Total
283 mil ion
55 mil ion
an online subscription video service, as a perk for
consumers who purchase certain wireless plans. Neither T-
Source: CRS analysis of data from S&P Global Market Intelligence
Mobile nor Sprint currently offers a proprietary video
and company documents for 1Q2018.
subscription service.
Dana A. Scherer, Specialist in Telecommunications Policy
Market Concentration in Mobile Wireless Segment. If
regulators determine that the mobile wireless market is
IF10915
https://crsreports.congress.gov
T-Mobile – Sprint Merger
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10915 · VERSION 2 · NEW
June 26, 2018
T-Mobile – Sprint Merger
On April 29, 2018, T-Mobile US and Sprint Corporation
decline is attributable to several factors. There is little
announced a merger agreement that could change
growth in the number of lines, as the vast majority of
competitive conditions within the telecommunications
potential users already have mobile phones. Many carriers’
industries. T-Mobile is valuing Sprint at approximately $59
service plans no longer include two-year contracts in
billion. The companies compete directly with one another
conjunction with subsidized smartphones, so customers can
in the mobile wireless voice and data services sectors for
terminate service without penalty if a competing provider
both residential and business customers. In addition, the
offers lower service fees. Carriers have generally revised
companies claim, the merger would enable them to compete
their service plans to offer more data usage for the same
directly with traditional in-home wireline broadband
amount, or less, than previously. Also, the proliferation of
services.
public Wireless Fidelity (Wi-Fi) services has enabled
mobile phone users to bypass their carriers’ mobile wireless
The Two Companies
networks, thereby limiting mobile carriers’ revenue.
T-Mobile
Figure 1. Service Revenues of Mobile Carriers
T-Mobile is the third-largest wireless carrier in the United
(dol ars in bil ions)
States, serving about 72.6 million customers under the T-
Mobile and Metro PCS brands. It is controlled by Deutsche
Telekom AG, which indirectly holds about 62% of T-
Mobile’s stock. Deutsche Telekom is based in Bonn,
Germany, and provides fixed broadband and wireless
services to customers in more than 50 countries.
Sprint
Sprint is the fourth-largest wireless carrier in the United
States, serving approximately 54.6 million retail and
wholesale wireless customers at the end of 2017 under its
Sprint, Boost Mobile, Virgin Mobile, and Assurance
Wireless brands. In addition, Sprint provides long-distance
voice services to other telecommunications companies and
select businesses over its landlines. Sprint also provides
Source: FCC 19th and 20th Mobile Wireless Competition Reports,
part of the backbone of the internet. As a Tier 1 internet
citing data from UBS Investment Research.
backbone provider, it can reach every other network on the
Notes: Revenues not adjusted for inflation. The decline in the share
internet without paying other companies to carry or transfer
of “Others” reflects industry consolidation.
data. Other Tier 1 internet backbone providers within the
United States include AT&T, Verizon, and Century Link.
Regulatory Review
Before the companies may complete the merger, three
Sprint is controlled by SoftBank Group Corp., which
indirectly holds about 84% of Sprint’s stock. SoftBank is
government entities must review it: (1) the FCC, (2) the
U.S. Department of Justice (DOJ), and (3) the Committee
based in Tokyo, Japan, and provides mobile and fixed-line
on Foreign Investment in the United States (CFIUS).
services in Japan. If the transaction is completed, Softbank
would join Deutsche Telekom as a major holder of T-
Mobile’s shares.
The FCC evaluates whether the transaction would be in the
public interest, pursuant to sections 214(a) and 310(d) of
Consumer and Industry Trends
the 1934 Communications Act, as amended. The FCC may
approve the merger without conditions, approve the merger
Four national carriers handle almost all mobile wireless
with conditions, or designate the merger for a hearing by an
traffic in the United States: AT&T Inc.; Verizon
FCC administrative law judge.
Communications Inc.; T-Mobile; and Sprint. The Federal
Communications Commission (FCC) estimates that these
four carriers accounted for about 98% of the nation’s
DOJ reviews the transaction to determine whether it would
substantially reduce competition, as prohibited by Section 7
mobile wireless service revenue in 2016.
of the Clayton Antitrust Act of 1914. DOJ may allow the
deal to go forward unchallenged, enter into a negotiated
Mobile wireless companies generate revenue from selling
consent agreement with the companies, or seek to stop the
mobile and data services and equipment, such as mobile
transaction by filing for a preliminary injunction in federal
phones and tablets. As Figure 1 illustrates, U.S. mobile
court.
wireless service revenues peaked in 2014. The revenue
https://crsreports.congress.gov
link to page 1 link to page 2 T-Mobile – Sprint Merger
CFIUS is an interagency committee that reviews foreign
distinct from the telecommunications market as defined in
investments in the United States to determine whether they
some other way, then they would assess the merger’s
threaten to impair national security or would result in
competitive impact, in part, by measuring the concentration
foreign control of critical infrastructure that could impair
of the industry before and after the merger.
national security. The President may block foreign
investment transactions that threaten to impair national
Antitrust authorities often use the Herfindahl-Hirschman
security. Alternatively, CFIUS may clear a transaction
Index (HHI) to measure how a merger could affect market
subject to conditions designed to mitigate the perceived
structure. The HHI is calculated by squaring the market
risks to U.S. national security the transaction otherwise
share of each firm competing in the product market and
would pose, or may take no action and thereby allow a
then summing the resulting numbers. This formula gives
transaction to proceed as proposed.
proportionately greater weight to larger market shares. For
communications companies, market shares can be measured
Potential Issues for Regulatory Review
by revenue or number of subscribers.
Within the last 10 years, T-Mobile has twice considered
merging with another mobile wireless carrier. Each time,
Based on 2016 revenue data described in Figure 1, the HHI
regulators indicated that they would seek to prevent the
of the mobile wireless industry was 2845 points. Post-
transaction out of concern that it would reduce competition.
merger, the HHI would be 3256. Thus, the increase would
be 410 points. According to the 2010 merger guidelines
In 2011, after AT&T announced its intention to acquire T-
published by DOJ and the Federal Trade Commission,
Mobile from Deutsche Telekom, DOJ announced that it
markets with HHIs above 2500 are highly concentrated, and
intended to seek to block the acquisition. In a press release,
mergers in highly concentrated markets that involve an
DOJ stated that the proposed acquisition would
increase of more than 200 points will be presumed to be
substantially lessen competition for mobile wireless
likely to enhance market power. Thus, if DOJ were to
communications in the United States. AT&T ended the
define mobile wireless as a separate market, it would likely
takeover attempt and paid Deutsche Telekom a break-up fee
presume that the proposed merger would give AT&T and
that included $3 billion in cash and spectrum valued at
Verizon as well as the merged T-Mobile-Sprint greater
about $1 billion. The fee enabled T-Mobile to offer
pricing power. The parties may rebut DOJ’s presumption
innovative features at lower prices and thereby gain market
by providing persuasive evidence that demonstrates the
share.
contrary.
More recently, Sprint and T-Mobile abandoned merger
Competitive Impact on Pre-Paid Customers. Wireless
discussions in 2014 after the FCC and DOJ suggested that
carriers serve two types of retail customers: postpaid and
the combination of the nation’s third- and fourth-largest
prepaid. Postpaid customers are billed monthly, after
mobile wireless carriers could lead to higher prices and
service has been provided. Prepaid customers pay in
fewer choices, particularly for consumers who are not able
advance of receiving services. Prepaid subscribers may lack
or willing to spend large amounts of money.
the credit background or income necessary to qualify for
postpaid services. Based on the data in Table 1, the HHI of
Defining the Relevant Product/Service Market. Since
the prepaid subscriber mobile wireless submarket is
those earlier merger efforts were blocked, the
currently 2686. Post-merger, the HHI would be 3902, with
telecommunications market has undergone significant
a change of 1216. Under the merger guidelines, DOJ would
change. As part of their reviews, the agencies must examine
presume the merger would likely enhance carriers’ market
the businesses of T-Mobile and Sprint both in terms of what
power in this segment of the market.
they sell (a product/service dimension), and where they sell
it (a geographic dimension). The companies have stated that
Table 1. Carrier Market Shares by Subscriber Type
they are increasingly competing with other service
As of March 31, 2018
providers as wireless, cable, satellite, and content-related
services converge. Regulators will need to determine
Postpaid Subscribers
Prepaid Subscribers
whether the relevant market for analysis is mobile wireless
T-Mobile
14%
38%
service only, or whether the convergence of previously
separate telecommunications services requires them to
Sprint
11%
16%
define the market in a different way.
AT&T
27%
29%
For example, since 2017 AT&T has expanded by acquiring
Verizon
39%
9%
DIRECTV, a satellite video subscriptions service, and Time
Warner Inc., which owns cable networks, a television
Others
8%
8%
studio, and a movie studio. AT&T has launched WatchTV,
Total
283 mil ion
55 mil ion
an online subscription video service, as a perk for
consumers who purchase certain wireless plans. Neither T-
Source: CRS analysis of data from S&P Global Market Intelligence
Mobile nor Sprint currently offers a proprietary video
and company documents for 1Q2018.
subscription service.
Dana A. Scherer, Specialist in Telecommunications Policy
Market Concentration in Mobile Wireless Segment. If
regulators determine that the mobile wireless market is
IF10915
https://crsreports.congress.gov
T-Mobile – Sprint Merger
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10915 · VERSION 2 · NEW