T-Mobile Closes $26 Billion Sprint Deal, Budget Conscious Consumers Beware

CBx Vibe:2 Phones” Kevin Gates

By CultureBanx Team

  • T-Mobile announced the closing of its $26B Sprint acquisition
  • 15% of Sprint users and 14% of T-Mobile users are Black

You may need to start paying close attention to your wireless bill as T-Mobile (TMUS -2.88%) announced the closing of its $26 billion Sprint acquisition. These combined companies could raise fees for pre-paid and other low-cost mobile phone plans, now that they have control of more than 127 million customers. With the U.S. wireless market dominated by three national players instead of four, will this leave Black and low income consumers behind in the wireless carrier race?

Why This Matters: Low cost mobile phone plans are the exact types of plans Sprint and T-Mobile had 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. To obtain regulatory approval, T-Mobile and Sprint agreed to sell off certain assets, including Sprint’s prepaid wireless business, to the satellite TV service Dish (DISH +0.11%).

Letitia James, the New York AG, argued that the merger would cost subscribers at least $4.5 billion annually

Letitia James, the New York attorney general, who was a key plaintiff in the case to stop  this merger, had argued that the deal would cost subscribers at least $4.5 billion annually, according to the New York Times.

You know the drill when it comes to mergers: everything is good and always will be, right up until it’s no longer good. The merged company has committed to not raising prices for three years, albeit that was before the coronavirus pandemic took over. It’s highly unlikely low cost options will remain with the market dominance this deal has brought about, though customers could see coverage and data speeds improve.

T-Mobile and Sprint sell their airwaves to smaller wireless carriers that primarily operate in the pre-paid space and also serve low-income and minority 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.

What’s Next: Only time will tell if low-income budget conscious consumers are going to be stuck with higher prices and fewer options. Americans already pay some of the highest prices for wireless and fixed broadband among all developed nations, so less competition probably won’t fix that. In the meantime Shares of T-Mobile are continuing on an upward trend and have increased more than 35% in the past two years.  

CBx Vibe:2 Phones” Kevin Gates

CONTRIBUTOR

CultureBanx Team

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