Three Downstream Implications of a Sprint/T-Mobile Combination

While there has been significant industry discussion about a possible Sprint/T-Mobile combination, there has been little discussion about potential implications for other areas of the industry. Here are three:

1) Broadcast incentive auction (and other upcoming FCC spectrum auctions) could suffer. T-Mobile, having essentially no spectrum below 1 GHz was expected to bid aggressively in the broadcast incentive auction. Sprint has approximately 13 MHz of SMR spectrum, so it is not quite as constrained with respect to lower frequency spectrum. If the Sprint and T-Mobile are tied-up trying to get approval for a merger or the early stages of integrating a merger, its quite possible that they won’t expend significant resources on the incentive auction or other auctions. We’re already seeing anemic interest in the H-block auction with both Sprint and T-Mobile declining to bid.

2) Tower operators could suffer. As the number of major bidders for tower space declines, the bidding leverage moves to the wireless companies and away from the tower operators. Sprint and T-Mobile both have significant amounts of PCS spectrum (est. 41 and 30 MHz respectively) – many of their antennas may be consolidated over time. We’ve previously discussed that the tower operators have not been participating proportionately in the increase in wireless traffic since so much of that growth is going to Wi-Fi and small cell sites where tower operators usually don’t participate. This trend shows little sign of slowing.

3) DISH may need to act decisively and bid for T-Mobile themselves. It’s becoming increasingly clear DISH needs to enter the wireless business to offset a maturing (declining) core television business. But it’s unlikely DISH wants to enter without a major industry partner. With fewer major partners to negotiate with, the bidding dynamics turn against DISH and the increased consolidation will likely make it even harder for a new entrant to enter alone. This may force DISH to make a serious bid for T-mobile to essentially “buy a partner.”

While the US wireless market is relatively mature, it certainly remains dynamic.