T-Mobile & Sprint’s Merger Could Challenge Budget-Conscious Customers
- T-Mobile is most popular among customers making less than $75,000 per year
- 15% of Sprint users and 14% of T-Mobile users are black
T-Mobile (TMUS -1.26%) and Sprint (S -0.76%) announced a $26 billion all-stock deal and if consummated they would have more than 127 million customers. This would leave the U.S. wireless market dominated by three national players instead of four. Where does this deal leave black consumers in the wireless carrier race?
Why This Matters: Consumer advocates have warned the combined company would raise fees for pre-paid and other low-cost mobile phone plans, which Sprint and T-Mobile have previously been driving down. The median household income for African Americans was just over $39,000 in 2016, putting black people directly in T-Mobile’s sweet spot among customers who make less than $75,000 per year. Sprint’s pre-paid brand Boost counts 83% of its users in that income range, according to data from Kagan, S&P Global Market Intelligence data.
T-Mobile and Sprint sell their airwaves to smaller wireless carriers that primarily operate in the pre-paid space and also serve low-income customers. Currently T-Mobile has 38% of the U.S. pre-paid market, while Sprint has 16%, according to S&P. If you look at the breakdown by race 15% of Sprint users and 14% of T-Mobile users are black, according to Nielsen’s Digital Media Vice President Jerry Rocha. Low cost options are unlikely to remain with the market dominance this deal would bring about, though customers could see coverage and data speeds improve.
Situational Awareness: This merger comes after the telecommunication companies failed three times prior to complete a tie-up. There is a major uphill battle in front of these wireless carriers to win over skeptical regulators. The telecommunication giants believe the merger would create thousands of jobs and help the U.S. beat China in creating 5G, the next generation mobile network.
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