Besides 5G leadership and greater network capacity, promoters of the $26.5 billion merger of Sprint and T-Mobile also claim that, as a result of better performance and reliability along with business synergies, prices will be lower for consumers. But if the United States’s four major carriers become three, observers are looking for prices to go higher as a reduction in competition reduces price pressure.
Those who are more concerned than others are lower income households. While AT&T and Verizon lead the market by sheer subscriber numbers, S&P Global Market Intelligence reports that T-Mobile is the most popular postpaid brand for customers that make $75,000 or less annually. In prepaid, 83 percent of customers with Sprint-owned Boost Mobile fall under the same earnings threshold.
For many in the middle- and working-class, Sprint and T-Mobile are the only real competition in the postpaid market they have access to. And between T-Mobile’s MetroPCS and Sprint’s Boost Mobile and Virgin Mobile, the two telecoms are pretty much the only big options in prepaid with a combined 54 percent market share.
One question that Department of Justice regulators might have in scrutinizing the deal is if the agency will treat the prepaid market separately from the postpaid market, and if so, how the merged company’s dominance in it will be addressed.
“You’ll see this company be the best in pre-paid and post-paid,” Sprint CEO Marcelo Claure told Reuters in a post-earnings call. “I think we have everything we need to lower prices and also grow market share.”
Also left in the lurch are Mobile Virtual Network Operators like FreedomPop, which are also typically prepaid networks, but they buy access to existing networks on a wholesale basis. Sprint and T-Mobile have been volleying price cuts for the past few years, but there are now doubts as to whether they will continue after the merger.
About 400,000 of FreedomPop’s 2 million subscribers make less than $40,000 a year. Half of its subscribers use a free lifeline service plan.
“T-Mobile and Sprint have been driving down pricing previously. You Won’t have competition at the bottom level anymore,” said FreedomPop chief executive Stephen Stokols.