T-Mobile and Sprint have embarked on the road to a merger, creating some consternation among competitors. One concern that the combined company would have too much power as a mobile virtual network operator — possibly controlling as much as 40 percent of the MVNO marketplace.
The question is, should regulators require the new company to do something about this prior to approving the deal?
The MVNO marketplace includes all the various brands T-Mobile and Sprint have built or acquired over the last several years — MetroPCS, Boost, Virgin Mobile and more. The concern is that too much power in the hands of one player is not a good thing. Higher prices and more difficult rules are among the potential undesirable consequences.
I don’t know what T-Mobile and Sprint have in mind, but at this point I don’t think merging will change their MVNO play. They need to merge in order to move into the coming 5G world, according to their own FCC merger application.
Based on that, I would think they need all the market share they can get, so they won’t tick off the MVNO sector of their business. If they do, there are plenty of competitors ready and willing to take it from them.
Besides, every other wireless carrier is also in the MVNO space, including AT&T Mobility and Verizon Wireless.
What Is MVNO?
In the past, wireless was always post-paid. Decades ago, you signed up for service and paid the bill for whatever you used at the end of the month. That meant people with poor credit or low incomes had a tough time getting wireless services.
Pre-paid wireless was successful in other countries, so U.S. service providers took advantage of it to address the need. In the past couple of decades, the pre-paid space has matured. It is now known as the “MVNO” space.
What started with low cost pre-paid services like Tracfone has developed into a high-level MVNO wireless service offered by companies that don’t own their own networks.
Google’s Project Fi, for example, resells Sprint and T-Mobile. Comcast Xfinity Mobile and Charter Spectrum Mobile resell Verizon Wireless. Altice will resell Sprint when it gets started next year.
Today’s marketplace is comprised of lots of top-quality service providers. MVNOs are the group of providers that don’t own their own networks but package and resell wireless services supplied by other companies’ mobile networks.
Every major wireless carrier — AT&T Mobility, Verizon Wireless, T-Mobile and Sprint — has MVNO agreements with a growing number of competitors, large and small. This is one way the wireless industry continues to grow.
MVNO Hardball Is Not an Option
If T-Mobile and Sprint should decide to play hardball with their MVNO customers, they would end up on the losing side. The wireless industry today is vibrant enough and has enough competitors to always guarantee choice.
The hardball approach would result in T-Mobile and Sprint losing their MVNO customers and partners to AT&T Mobility and Verizon Wireless. That risk alone is likely enough to ensure that the newly merged wireless carrier would play fair.
If competitors really are worried, and if there is good reason for their concern, they should try to convince the FCC and other regulators to impose conditions on the merger. What might that look like? Perhaps the companies could be required to sell a percentage of their MVNO business to reduce their 40 percent market share.
At this early stage, I don’t see the MVNO issues as being a big threat, but if it is, it should be addressed.
In any case, I don’t think this issue will stand in the way of a T-Mobile, Sprint merger. It makes a great deal of sense for these two companies and for the industry.
Over the last few years, it has become evident that Sprint has plenty of spectrum but has failed to market well. T-Mobile has done better with marketing, but it simply has too little spectrum. If these two companies merge, they will be able to function as a solid third place competitor.
Three strong competitors are better than two strong and two weak ones.