The DOJ’s T-Mobile & Sprint $26 Billion Agreement Challenges Budget-Conscious Consumers
By CultureBanx Team
The DOJ has reached an agreement on T-Mobile’s $26B Sprint deal
15% of Sprint users and 14% of T-Mobile users are black
The U.S. Department of Justice (DOJ) has reached an agreement on telecom giant T-Mobile’s (TMUS +5.43%) $26 billion deal with Sprint (S +7.39%), so start paying close attention to your wireless bill. This deal could raise fees for pre-paid and other low-cost mobile phone plans. With the U.S. wireless market dominated by three national players instead of four, perhaps black consumers may be left behind in the wireless carrier race.
Why This Matters: Previously Sprint and T-Mobile had been driving down fees on pre-paid customer plans. Last year T-Mobile had 38% of the U.S. pre-paid market, while Sprint had 16%, according to S&P. If you look at the breakdown by race Nielsen’s Digital Media group found that 15% of Sprint users and 14% of T-Mobile users are black. As part of the DOJ agreement, Dish Network (D +0.87%) will pay $5 billion for Sprint’s Boost Mobile, Virgin Mobile and other prepaid phone businesses. Once the deal closes they will have 127 million customers, and continue to sell their airwaves to smaller wireless carriers, that primarily operate in the pre-paid space.
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. 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.
Team Telecom which consists of the Committee on Foreign Investment (CFIUS) in the U.S., the Justice Department, Department of Homeland Security, and the Defense Department already provided their consent to the deal. However, they still face an ongoing lawsuit from 13 state attorneys general before the deal can officially close.
What’s Next: Only time will tell if low-income budget conscious consumers are going to be stuck with higher prices and fewer options. T-Mobile and Sprint said they expect regulators will approve the merger in the third quarter and the deal to close in the second half of this year.
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