What’s in a Name: Why T-Mobile Holds All the Cards

Source: http://www.flickr.com/photos/thomashawk

The past several months have brought about a cascade of mergers and acquisitions in the telecom industry. Beginning with the announcement that Comcast (NASDAQ:CMCSA) would be merging with Time Warner Cable (NYSE:TWC), the domino effect has been fast and furious. As a Comcast-Time Warner Cable merger would create the country’s largest cable and Internet service provider, other companies needed to mount their own offenses to keep up. AT&T (NYSE:T) proceeded to lock horns and buy DirecTV (NASDAQ:DTV), creating another would-be telecom juggernaut, set to stand up to Comcast. Meanwhile, Verizon (NYSE:VZ), the remaining big player, decided to stick to its current plan and watch the regulatory agencies sort the whole thing out.

All of these mergers and buyouts led many to conclude that the age of monopolistic telecom super-companies was at hand, and that most of the smaller companies would need to make drastic moves or face extinction. That logic wasn’t lost on two of AT&T and Verizon’s competitors, T-Mobile (NYSE:TMUS) and Sprint (NYSE:S), who recently decided that combining forces would be the best idea if their companies wanted to survive.

Both companies have been lagging well behind Verizon and AT&T over the past few years in the mobile market. Just a couple of years ago, T-Mobile was seeing customers jump ship left and right behind complaints of shoddy service. The company even flirted with AT&T in a prospective merger that never manifested. As a result, things looked bleak for the Bellevue, Washington-based company. Sprint has also been in quite a bit of trouble recently. Through 2011 and 2012, the company’s customers were abandoning the carrier in favor of the bigger service providers, taking on massive losses as a result.

To effectively counter the growing and seemingly monopolistic aspirations of both Verizon and AT&T, the idea of a Sprint and T-Mobile merger looks to be incredibly sound. The nation’s third- and fourth-largest carriers wouldn’t be able to survive for much longer facing such formidable threats, even with spirited new campaigns to reclaim lost ground. The one advantage both T-Mobile and Sprint look to have against their bigger rivals is that consumers are growing increasingly frustrated with Verizon and AT&T, although nothing really compares to consumers’ hatred of Comcast.

Source: Thinkstock

 What’s in a name?

As Sprint and T-Mobile work on banging out the details of their merger, the question has popped up as to what name the new conglomerate will operate under. It’s been assumed that the company will push forward under the Sprint banner, but it appears that T-Mobile is now becoming the more likely candidate. And there’s one simple reason for it: momentum.

T-Mobile, after appointing new CEO John Legere, has been making major waves in the mobile industry with strong campaigns to reclaim lost customers. The company has billed itself as “the uncarrier” and has enacted drastic changes to its business plan, including dropping contracts, launching LTE, and even paying customers to switch over from Verizon or AT&T. So far, the plan has worked: T-Mobile has been able to take a serious bite out of the larger carriers’ numbers. According to Ad Age, T-Mobile was able to recover 4.4 million subscribers in 2013 thanks to aggressive campaigns targeted at both AT&T and Verizon.

The company has also been vaulting up the ladder in consumer perception surveys, oulling itself even with Verizon and ahead of both Sprint and AT&T.

Signs are pointing toward a T-Mobile name following the merger’s completion, which is expected to come with a price tag of $32 billion. Sprint is on the paying end of the deal, and in what appears to be an odd turn of events, would actually be purchasing the right to forfeit its name in lieu of T-Mobile’s. The fact is, consumers are excited about what T-Mobile is doing. The company is shaking up the industry and taking big shots at the larger companies. People love an underdog, and when a company in an industry that is dominated by only a few large names starts making major changes to stay competitive, consumers respond.

Sprint, on the other hand, hasn’t done much of anything to get customers excited over the past couple of years. T-Mobile has yet to catch up to Sprint, which is currently the third-largest carrier in the country, but T-Mobile is the name that people are talking about, and the name that has marketing teams at bigger carriers scrambling to fight off.

Source: Thinkstock

What it means for consumers

For consumers, the results of the T-Mobile-Sprint merger could be mixed. While it’s a good thing to have a stronger third choice for cell subscribers, consolidation of corporate power is not necessarily a positive. Ensuring that T-Mobile and Sprint stick around for the long haul is better than watching them both be wiped out by the two larger companies. The larger network footprint is also something that neither company could match on its own, thus increasing the ability to rival AT&T and Verizon’s networks.

There’s also the possibility of better deals for consumers, as well. If the deal does go forward, analysts are arguing that Sprint would need to slash its prices in order to be more in line with T-Mobile’s. Fierce Wireless says Sprint’s average revenue per postpaid customer came in at $63.52, while T-Mobile’s tallied in at $50.01. That’s quite a disparity, and if the merger were to go through, uniform prices would need to be adopted. Whether that means a level of compromise is reached and some users need to pay a slightly higher cost has yet to be addressed.

While it’s debatable if the proposed T-Mobile-Sprint merger is a positive for consumers, it definitely appears to be a win-win for T-Mobile, at the very least. The companies have agreed to a generous breakup fee if the merger does not go through, and if it does, then the both companies essentially double their size and resources.

As of right now, T-Mobile looks to be the new moniker under which Sprint would adopt going forward. As mentioned previously, T-Mobile holds all the cards when it comes to momentum, as it has people talking. With that said, perhaps the T-Mobile logo could use some yellow accents?

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