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Inevitable Path of Consolidation – What’s Next for Sprint?

Jan 15, 2018
Brad Akyuz, Director ;
Consumer Electronics , Commercial Technology , Connected Intelligence

In my last predictions piece The Cable Threat is More Real Than Ever, I covered how the cable players are poised to become even more of a threat in the already competitive U.S. mobile market in 2018. With cellphone penetration reaching saturation levels, switcher activity has become the mainstream method for subscriber growth, and this is where the established players run into problems. Service price continues to be the primary motivator for switching behavior, and the never-ending price wars from postpaid and prepaid carriers keep pushing service revenues down. The carriers are getting to a point where it is no longer feasible to offer such discounted service pricing and prices will have to gradually increase, which will create major problems for carriers such as Sprint that bank on aggressive pricing for survival.

Sprint has been struggling to protect its subscriber base, which keeps migrating to rivals offering better network/service combos. Sprint’s response to this exodus has been extremely low service pricing (i.e. cut your bill in half for AT&T/Verizon switchers or Unlimited Data for 5 lines at $100/month – just to be clear, that is $100 a month for all five lines, not per line!). This was an understandable strategy in the context of its merger plans, but that is no longer the case.

Sprint’s owner, Softbank, had been eying T-Mobile as a merger/acquisition target since it took control of Sprint in mid-2013, and more connections on the Sprint network would translate to a stronger negotiating muscle at the tablet against Deutsche Telekom (parent of T-Mobile). Unfortunately for Sprint, however, T-Mobile has enjoyed an amazing run since then, and by the time the merger/acquisition talks were solidifying, T-Mobile became too big for Sprint to swallow. With the T-Mobile merger/acquisition off the table, Sprint is now left with a struggling network that requires massive investment to be competitive, and a client base spending little money due to the price concessions Sprint used to lure them in.

We expect 2018 to be the year of self-contemplation for Sprint. Softbank will either decide to invest in the business or look for new partners with deep pockets or valuable assets, such as spectrum (Dish Network, Cable Consortium), for survival.


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