While a few procedural steps remain before it’s a done deal, T-Mobile’s merger with Sprint has cleared the biggest of hurdles and the deal appears headed for closure within the next month or two.
That means the writing should be on the wall: With Sprint’s 2.5 GHz spectrum trove and T-Mobile’s 600 MHz and other spectrum, including what it’s picking up in recent millimeter wave auctions, the 5G network crown is T-Mobile’s to lose.
Several investment analyst reports in recent days generally reach the same conclusion.
“For Verizon and AT&T, the going is likely to get tougher when the deal closes,” wrote Craig Moffett of MoffettNathanson in a report today. “They will face not only a diminished pool of available subscribers as Sprint’s churn rate improves and as Cable’s marketing in wireless accelerates, but also a 5G network that is positioned to be better than what either AT&T or Verizon appears ready to offer.”
Soon after the transaction closes, T-Mobile will start deploying 60 MHz of fallow 2.5 GHz spectrum across its ~70,000 cell sites. In addition, it will deploy its 600 MHz, 700 MHz, PCS and AWS spectrum on the 12,000 Sprint sites that it retains, according to analysts at New Street Research, which recently published a detailed 41-page analysis on the New T-Mobile.
“Deploying the 2.5 GHz with 5G will also materially increase the performance of the network, giving T-Mobile a strong lead over AT&T and Verizon and improving the value of their offer relative to competitors,” the New Street analysts wrote.
The depth of Sprint’s 2.5 GHz spectrum is particularly well suited for 5G, and it’s now considered mid-band (there was a time when 1.9 GHz was considered high), which is something Verizon is sorely lacking. It’s become something of a crown jewel.
“This should enable T-Mobile to deliver a materially superior 5G experience compared to what is deployed by U.S. operators today and well ahead of any C-Band spectrum deployments,” wrote LightShed Partners analysts Walter Piecyk and Joe Galone in a blog last week.
Moffett said the general press has broadly communicated the notion that 5G isn’t worth it right now. “There simply isn’t a case for an end user to upgrade to 5G based on what’s out there today (per Opensignal; either poor availability or poor speeds). New T-Mobile appears to be positioned as the first out of the gate with something better.”
It’s also worth remembering that not all mid-band spectrum is created equal: The propagation of New T-Mobile’s 2.5 GHz spectrum is much better than the propagation of 3.7 – 4.2 GHz C-Band spectrum, Moffett said.
Another thing going for it in the spectrum realm: T-Mobile confirmed to Fierce that should the merger close, New T-Mobile will have spectrum assets for both FDD and TDD operations, and will use both. That might sound like a no-brainer, but it’s emblematic of its spectrum position.
“TDD is the future,” said Bill Ho, principal at 556 Ventures, noting that 5G is the first time that TDD is in the lead. In generations past, the U.S. was predominantly stuck on FDD—with the exception of Sprint—while other parts of the world were quicker to use TDD. Massive MIMO, which works best with TDD, enabled Sprint to introduce 5G sooner rather than later.
What about rivals?
AT&T claims to hold a “tremendous lead” in spectrum over the competition in terms of low and mid-band spectrum, and it won the beachfront 700 MHz spectrum as part of the FirstNet contract.
It would appear to have the right collection of resources, but as of yet, it hasn’t disclosed a band plan, “nor do they appear to have done all that much to densify their network in anticipation of deployment,” Moffett wrote. “To be sure, their secrecy may be just that – secrecy. But it isn’t clear what they gain by keeping their band plan a secret.”
Dish Network also will be entering the mix, and it can leverage virtualization and a software-driven 5G greenfield network, but let’s face it, it’s got a long road ahead.
When it comes to existing rivals, T-Mobile has dug its knives in deep for the biggest of all: Verizon, which for years has declared itself the winner on network quality. Scores of studies compare speeds, coverage and other metrics of all the big carriers, but so far, Verizon has more often than not consistently come out on top. However, a lot of Wall Street analysts are skeptical that its millimeter wave strategy in 5G is going to pay off.
None of this is to suggest that Verizon’s network strategy is going to crash and burn. It very well might prove naysayers wrong and get out with a 5G service that’s head and shoulders above the rest—if it moves fast and densifies like crazy. But it’s still missing the mid-band link, and it’s going to take time to deploy the C-band spectrum by the time the auction starts and finishes. It’s also not entirely clear that the Federal Communications Commission (FCC) is on the most solid of legal grounds with its 3-2 vote last month to move forward on the C-band auction plan.
Still, as Wells Fargo Securities analysts said in a report about Verizon last month: Goliath is not taking a nap. After attending Verizon’s analyst day last month, Wells Fargo analysts basically said they think concerns are overblown.
“We walked away with continued conviction that VZ has a very focused and solid plan in place,” wrote senior analyst Jennifer Fritzsche. “VZ’s network strategy centers around its fiber centric network orientation… While we like TMUS and believe the opportunity it has with Sprint will be a significant one, we have done this too long to know that network integration is never immediate or easy and what history has shown us is VZ has often been a net winner in taking advantage of the period of disruption going around it.”
Of course, anything can happen, and T-Mobile can screw it up. Executives are getting shuffled around, and there’s no guarantee they’re going to mesh as well as the team under outgoing Legere. They’ve made a lot of promises, and diehard merger opponents will be closely watching every change they make. Chief among them: jobs.
T-Mobile already appears to have made some questionable moves in the prepaid division, with reports circulating about layoffs among the Metro by T-Mobile staff. Prepaid was one of the areas that most concerned some state Attorneys General who fought against the merger. Tied to that is what appears to be a lack of communication with dealers who operate Metro and Boost stores and the “optics,” as they say, don’t look good. These folks are duking it out every day in the trenches and they need to know they’re going to be OK.
Sprint, in its latest iteration, is a product of a merger gone bad. That was a different time and place and arguably a bad idea from the get-go. The New T-Mobile has a lot more going for it, and its executives and lawyers successfully argued that teaming T-Mobile with Sprint makes for a much stronger third player to go up against Verizon and AT&T.
“They’re in a really good spot,” said analyst Daryl Schoolar of Omdia. “I believe if operators could in the U.S., they would all be doing mid-band first. Millimeter wave is the icing on the cake. It’s not what you really should be leading with. The only reason why you see it so much here is those operators don’t have any choice.”
Who would have guessed a few short years ago that Sprint’s spectrum would be a boon for T-Mobile? Both of them, starting as PCS entrants, for years struggled without the low-band spectrum the legacy networks of Verizon and AT&T enjoyed. With the closure close at hand, it’s time for T-Mobile to show us what it's got. —Monica @malleven33
Editor's Corners are opinion columns written by a member of the Fierce editorial team. They are edited for balance and accuracy.